10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________ 

FORM 10-Q

__________________________________ 

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                    

Commission File Number: 001-34452

__________________________________ 

Apollo Commercial Real Estate Finance, Inc.

(Exact name of registrant as specified in its charter)

__________________________________ 

Maryland	27-0467113
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Apollo Commercial Real Estate Finance, Inc.

c/o Apollo Global Management, LLC

9 West 57th Street, 43rd Floor,

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 515–3200

(Registrant’s telephone number, including area code)

__________________________________ 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	ARI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 23, 2019, there were 153,531,597 shares, par value $0.01, of the registrant’s common stock issued and outstanding.

Table of Contents

	Page
Part I — Financial Information
Item 1. Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures about Market Risk	37
Item 4. Controls and Procedures	39
Part II — Other Information
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	40

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands—except share data)

	June 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents	$	116,472		$	109,806
Commercial mortgage loans, net (includes $3,638,419 and $3,197,900 pledged as collateral under secured debt arrangements in 2019 and 2018, respectively)	4,206,754			3,878,981
Subordinate loans, net	1,236,990			1,048,612
Other assets	40,072			33,720
Derivative assets	19,502			23,700
Loan proceeds held by servicer	4,619			1,000
Total Assets	$	5,624,409		$	5,095,819
Liabilities and Stockholders' Equity
Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $18,246 and $17,555 in 2019 and 2018, respectively)	$	1,783,057		$	1,879,522
Convertible senior notes, net	559,619			592,000
Senior secured term loan, net (net of deferred financing costs of $7,333 and $0 in 2019 and 2018, respectively)	490,226			—
Derivative liabilities	13,113			—
Accounts payable, accrued expenses and other liabilities	96,736			104,746
Payable to related party	10,259			9,804
Total Liabilities	2,953,010			2,586,072
Commitments and Contingencies (see Note 15)
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series B preferred stock, 6,770,393 shares issued and outstanding ($169,260 liquidation preference)	68			68
Series C preferred stock, 0 and 6,900,000 issued and outstanding ($0 and $172,500 liquidation preference in 2019 and 2018), respectively	—			69
Common stock, $0.01 par value, 450,000,000 shares authorized, 153,531,597 and 133,853,565 shares issued and outstanding in 2019 and 2018, respectively	1,535			1,339
Additional paid-in-capital	2,817,542			2,638,441
Accumulated deficit	(147,746		)	(130,170		)
Total Stockholders’ Equity	2,671,399			2,509,747
Total Liabilities and Stockholders’ Equity	$	5,624,409		$	5,095,819

See notes to unaudited condensed consolidated financial statements.

4

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations (Unaudited)

(in thousands—except share and per share data)

	Three months ended June 30,							Six months ended June 30,
	2019			2018				2019			2018
Net interest income:
Interest income from commercial mortgage loans	$	77,458		$	65,141			$	155,744		$	117,255
Interest income from subordinate loans	41,043			34,075				81,882			67,928
Interest expense	(33,511		)	(28,437		)		(69,806		)	(51,177		)
Net interest income	84,990			70,779				167,820			134,006
Operating expenses:
General and administrative expenses (includes equity-based compensation of $4,294 and $8,195 in 2019 and $4,014 and $7,356 in 2018, respectively)	(6,574		)	(5,652		)		(12,725		)	(10,650		)
Management fees to related party	(10,259		)	(9,013		)		(19,872		)	(17,105		)
Total operating expenses	(16,833		)	(14,665		)		(32,597		)	(27,755		)
Other income	484			343				1,002			546
Reversal of (Provision for) loan losses and impairments	15,000			(5,000		)		15,000			(5,000		)
Realized loss on investments	(12,513		)	—				(12,513		)	—
Foreign currency loss	(7,777		)	(29,649		)		(883		)	(19,524		)
Gain on foreign currency forwards (includes unrealized gains (losses) of $10,787 and $(4,198) in 2019 and $24,796 and $15,941 in 2018, respectively)	11,186			33,538				4,466			22,506
Unrealized loss on interest rate swap	(13,113		)	—				(13,113		)	—
Net income	$	61,424		$	55,346			$	129,182		$	104,779
Preferred dividends	(4,919		)	(6,834		)	—	(11,754		)	(13,669		)
Net income available to common stockholders	$	56,505		$	48,512			$	117,428		$	91,110
Net income per share of common stock:
Basic	$	0.38		$	0.39			$	0.83		$	0.78
Diluted	$	0.37		$	0.39			$	0.80		$	0.78
Basic weighted-average shares of common stock outstanding	145,567,963			123,019,993				140,117,813			116,651,305
Diluted weighted-average shares of common stock outstanding	174,101,234			124,629,317				169,418,177			118,281,153
Dividend declared per share of common stock	$	0.46		$	0.46			$	0.92		$	0.92

See notes to unaudited condensed consolidated financial statements.

5

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

(in thousands—except share and per share data)

	Preferred Stock			Common Stock			Additional Paid-In-Capital			Accumulated Deficit			Total
	Shares	Par		Shares	Par
Balance at January 1, 2018	13,670,393	$	137	107,121,235	$	1,071	$	2,170,078		$	(83,143	)	$	2,088,143
Capital increase (decrease) related to Equity Incentive Plan	—	—		345,996	4		(1,389		)	—			(1,385		)
Issuance of common stock	—	—		15,525,000	155		275,724			—			275,879
Offering costs	—	—		—	—		(377		)	—			(377		)
Net income	—	—		—	—		—			49,433			49,433
Dividends declared on preferred stock	—	—		—	—		—			(6,835		)	(6,835		)
Dividends declared on common stock - $0.46 per share	—	—		—	—		—			(57,328		)	(57,328		)
Balance at March 31, 2018	13,670,393	$	137	122,992,231	$	1,230	$	2,444,036		$	(97,873	)	$	2,347,530
Capital increase related to Equity Incentive Plan	—	—		28,070	—		4,013			—			4,013
Offering costs	—	—		—	—		(76		)	—			(76		)
Net income	—	—		—	—		—			55,346			55,346
Dividends declared on preferred stock	—	—		—	—		—			(6,834		)	(6,834		)
Dividends declared on common stock - $0.46 per share	—	—		—	—		—			(57,326		)	(57,326		)
Balance at June 30, 2018	13,670,393	$	137	123,020,301	$	1,230	$	2,447,973		$	(106,687	)	$	2,342,653

	Preferred Stock					Common Stock			Additional Paid-In-Capital			Accumulated Deficit			Total
	Shares		Par			Shares	Par
Balance at January 1, 2019	13,670,393		$	137		133,853,565	$	1,339	$	2,638,441		$	(130,170	)	$	2,509,747
Capital increase (decrease) related to Equity Incentive Plan	—		—			433,426	4		(1,099		)	—			(1,095		)
Conversions of convertible senior notes for common stock	—		—			1,967,361	20		33,758			—			33,778
Net income	—		—			—	—		—			67,758			67,758
Dividends declared on preferred stock	—		—			—	—		—			(6,835		)	(6,835		)
Dividends declared on common stock - $0.46 per share	—		—			—	—		—			(63,529		)	(63,529		)
Balance at March 31, 2019	13,670,393		$	137		136,254,352	$	1,363	$	2,671,100		$	(132,776	)	$	2,539,824
Capital increase related to Equity Incentive Plan	—		—			27,245	—		4,294			—			4,294
Issuance of common stock	—		—			17,250,000	172		314,985			—			315,157
Redemption of preferred stock	(6,900,000	)	(69		)	—	—		(172,431		)	—			(172,500		)
Offering costs	—		—			—	—		(406		)	—			(406		)
Net income	—		—			—	—		—			61,424			61,424
Dividends declared on preferred stock	—		—			—	—		—			(4,919		)	(4,919		)
Dividends declared on common stock - $0.46 per share	—		—			—	—		—			(71,475		)	(71,475		)
Balance at June 30, 2019	6,770,393		$	68		153,531,597	$	1,535	$	2,817,542		$	(147,746	)	$	2,671,399

See notes to unaudited condensed consolidated financial statements.

6

Apollo Commercial Real Estate Finance, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows (Unaudited)

(in thousands)

	For the six months ended June 30,
	2019			2018
Cash flows (used in) provided by operating activities:
Net income	$	129,182		$	104,779
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount/premium and PIK	(40,490		)	(30,192		)
Amortization of deferred financing costs	5,487			5,355
Equity-based compensation	3,195			2,628
(Reversal of) Provision for loan losses and impairments	(15,000		)	5,000
Realized loss on Investments	12,513			—
Foreign currency gain	3,068			17,371
Unrealized (gain) loss on derivative instruments	17,311			(15,941		)
Changes in operating assets and liabilities:
Proceeds received from PIK	—			75,652
Other assets	(6,460		)	(4,069		)
Accounts payable, accrued expenses and other liabilities	668			10,190
Payable to related party	455			845
Net cash (used in) provided by operating activities	109,929			171,618
Cash flows used in investing activities:
New funding of commercial mortgage loans	(511,310		)	(1,275,507		)
Add-on funding of commercial mortgage loans	(175,497		)	(60,500		)
New funding of subordinate loans	(276,607		)	(201,966		)
Add-on funding of subordinate loans	(12,825		)	(43,284		)
Proceeds and payments received on commercial mortgage loans	341,453			227,913
Proceeds and payments received on subordinate loans	130,567			367,143
Origination and exit fees received on commercial mortgage and subordinate loans	12,275			28,362
Decrease in collateral held related to derivative contracts	(18,180		)	4,930
Net cash (used in) provided by investing activities	(510,124		)	(952,909		)
Cash flows from financing activities:
Proceeds from issuance of common stock	315,157			275,879
Redemption of preferred stock	(172,500		)	—
Payment of offering costs	(141		)	(188		)
Proceeds from secured debt arrangements	981,529			1,367,211
Repayments of secured debt arrangements	(1,063,071		)	(723,260		)
Proceeds from issuance of senior secured term loan	497,500			—
Exchanges and conversions of convertible senior notes	(704		)	—
Payment of deferred financing costs	(9,416		)	(11,314		)
Dividends on common stock	(126,289		)	(114,655		)
Dividends on preferred stock	(15,204		)	(13,669		)
Net cash (used in) provided by financing activities	406,861			780,004
Net increase (decrease) in cash and cash equivalents	6,666			(1,287		)
Cash and cash equivalents, beginning of period	109,806			77,671
Cash and cash equivalents, end of period	$	116,472		$	76,384
Supplemental disclosure of cash flow information:
Interest paid	$	62,915		$	43,420
Supplemental disclosure of non-cash financing activities:
Exchange of convertible senior notes for common stock	$	33,778		$	—
Dividend declared, not yet paid	$	74,295		$	64,162
Offering costs payable	$	265		$	—
Loan proceeds held by servicer	$	4,619		$	—
Deferred financing costs, not yet paid	$	4,095		$	—

See notes to unaudited condensed consolidated financial statements.

Apollo Commercial Real Estate Finance Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Organization

Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the "Company," "ARI," "we," "us" and "our") is a corporation that has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.

We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and are externally managed and advised by ACREFI Management, LLC (the "Manager"), an indirect subsidiary of Apollo Global Management, LLC (together with its subsidiaries, "Apollo").

We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain our tax qualification as a REIT, we are required to distribute at least 90% of our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include loan loss reserves and impairment. Actual results could differ from those estimates.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year or any other future period.

We currently operate in one reporting segment.

Recent Accounting Pronouncements

In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07 "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting" ("ASU 2018-07"). The intention of ASU 2018-07 is to expand the scope of Topic 718 to include share-based payment transactions in exchange for goods and services from nonemployees. These share-based payments will now be measured at grant-date fair value of the equity instrument issued. Upon adoption, only liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established should be remeasured through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 and is applied retrospectively. We adopted ASU 2018-07 in the first quarter of 2019 and it did not have any impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326)" ("ASU 2016-13"). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  The guidance will replace the "incurred loss" approach under existing guidance with an "expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The guidance is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. While we are currently evaluating the impact ASU 2016-13 will have on our condensed consolidated financial statements, we expect that the adoption will result in higher provisions for expected loan losses.    

7

Note 3 – Fair Value Disclosure

GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair values. Market based, or observable inputs are the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy as noted in ASC 820 "Fair Value Measurements and Disclosures" are described below:

Level I — Quoted prices in active markets for identical assets or liabilities.

Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.

While we anticipate that our valuation methods will be appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.

The estimated fair values of our derivative instruments are determined using a discounted cash flow analysis on the

expected cash flows of each derivative. The fair values of foreign exchange forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries. The fair value of the interest rate swap is determined by comparing the present value of remaining fixed payments to the present value of expected floating rate payments based on the forward one-month LIBOR curve. Our derivative instruments are classified as Level II in the fair value hierarchy.

The following table summarizes the levels in the fair value hierarchy into which our financial instruments were categorized as of June 30, 2019 and December 31, 2018 ($ in thousands): 

	Fair Value as of June 30, 2019										Fair Value as of December 31, 2018
	Level I		Level II			Level III		Total			Level I		Level II		Level III		Total
Foreign currency forward assets, net	$	—	$	19,502		$	—	$	19,502		$	—	$	23,700	$	—	$	23,700
Interest rate swap liability	—		(13,113		)	—		(13,113		)	—		—		—		—

Note 4 – Commercial Mortgage and Subordinate Loans, Net

Our loan portfolio was comprised of the following at June 30, 2019 and December 31, 2018 ($ in thousands):

Loan Type	June 30, 2019		December 31, 2018
Commercial mortgage loans, net	$	4,206,754	$	3,878,981
Subordinate loans, net	1,236,990		1,048,612
Total loans, net	$	5,443,744	$	4,927,593

Our loan portfolio consisted of 93% and 91% floating rate loans, based on amortized cost, as of June 30, 2019 and December 31, 2018, respectively.

Activity relating to our loan investment portfolio, for the six months ended June 30, 2019, was as follows ($ in thousands):

	Principal Balance		Deferred Fees/Other Items (1)			Provision for Loan Loss (2)			Carrying Value
December 31, 2018	$	4,982,514	$	(17,940	)	$	(36,981	)	$	4,927,593
New loan fundings	787,917		—			—			787,917
Add-on loan fundings (3)	188,322		—			—			188,322

8

Loan repayments	(490,087		)	—			—			(490,087		)
Gain (loss) on foreign currency translation	(2,806		)	(58		)	—			(2,864		)
Provision for loan loss / (Realized loss on Investment) (2)	(12,513		)	—			15,000			2,487
Deferred fees	—			(12,275		)	—			(12,275		)
PIK interest and amortization of fees	29,201			13,450			—			42,651
June 30, 2019	$	5,482,548		$	(16,823	)	$	(21,981	)	$	5,443,744

———————

(1) Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.

(2) In addition to the $22.0 million provision for loan loss, we recorded an impairment of $3.0 million against an investment previously recorded under other assets on our condensed consolidated balance sheet. During the second quarter of 2019, the underlying collateral on a commercial mortgage loan and a contiguous subordinate loan secured by a multifamily property located in Williston, ND was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

(3) Represents fundings for loans closed prior to 2019.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):

	June 30, 2019			December 31, 2018
Number of loans	71			69
Principal balance	$	5,482,548		$	4,982,514
Carrying value	$	5,443,744		$	4,927,593
Unfunded loan commitments (1)	$	1,192,118		$	1,095,598
Weighted-average cash coupon (2)	8.2		%	8.4		%
Weighted-average remaining term (3)	2.9 years			2.8 years

  ———————

(1) Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.

(2) For floating rate loans, based on applicable benchmark rates as of the specified dates.

(3) Assumes all extension options are exercised.

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

	June 30, 2019				December 31, 2018
Property Type	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Hotel	$	1,322,167	24.3	%	$	1,286,590	26.1	%
Residential-for-sale: construction	706,260		12.9	%	528,510		10.7	%
Residential-for-sale: inventory	395,375		7.3	%	577,053		11.7	%
Office	1,202,311		22.2	%	832,620		16.9	%
Urban Predevelopment	595,263		10.8	%	683,886		13.9	%
Multifamily	472,785		8.7	%	448,899		9.1	%
Industrial	227,451		4.2	%	32,000		0.6	%
Retail Center	158,128		2.9	%	156,067		3.2	%
Healthcare	142,933		2.6	%	156,814		3.2	%
Other	120,041		2.2	%	151,197		3.1	%
Mixed Use	101,030		1.9	%	73,957		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

9

	June 30, 2019				December 31, 2018
Geographic Location	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Manhattan, NY	$	1,883,438	34.6	%	$	1,669,145	33.9	%
Brooklyn, NY	553,859		10.2	%	346,056		7.0	%
Northeast	18,738		0.3	%	23,479		0.5	%
West	696,804		12.8	%	614,160		12.5	%
Midwest	638,981		11.8	%	631,710		12.8	%
Southeast	501,878		9.2	%	559,043		11.3	%
Southwest	119,910		2.2	%	96,345		2.0	%
Mid Atlantic	108,056		2.0	%	211,775		4.3	%
United Kingdom	654,952		12.0	%	700,460		14.2	%
Other International	267,128		4.9	%	75,420		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

1.    Very low risk

2.    Low risk

3. Moderate/average risk

4. High risk/potential for loss: a loan that has a risk of realizing a principal loss

5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or has been impaired

The following table allocates the carrying value of our loan portfolio based on our internal risk ratings at the dates indicated ($ in thousands):

	June 30, 2019					December 31, 2018
Risk Rating	Number of Loans	Carrying Value		% of Loan Portfolio		Number of Loans	Carrying Value		% of Loan Portfolio
1	—	$	—	—	%	—	$	—	—	%
2	3	253,817		5	%	3	138,040		3	%
3	66	5,010,351		92	%	63	4,573,930		93	%
4	—	—		—	%	—	—		—	%
5	2	179,576		3	%	3	215,623		4	%
	71	$	5,443,744	100	%	69	$	4,927,593	100	%
Weighted-average risk rating				3.0					3.1

We evaluate our loans for possible impairment on a quarterly basis. We regularly evaluate the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash 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 property’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 properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such loan loss analysis is completed and reviewed by asset

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management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property 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. An allowance for loan loss is established when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan.

We evaluate modifications to our loan portfolio to determine if the modifications constitute a troubled debt restructuring ("TDR") and/or substantial modification, under ASC Topic 310, "Receivables." During the second quarter of 2018, we determined that a modification of one commercial mortgage loan, secured by a retail center in Cincinnati, OH, with a principal balance of $171.2 million constituted a TDR as the interest rate spread was reduced from 5.5% over LIBOR to 3.0% over LIBOR. The entity in which we own an interest and which owns the underlying property was deemed to be a variable interest entity ("VIE") and it was determined that we are not the primary beneficiary of that VIE. During the fourth quarter of 2018, we recorded a $15.0 million loan loss provision against this loan. After the loan loss provision, the amortized cost of the loan was $158.1 million and $156.1 million as of June 30, 2019 and December 31, 2018, respectively. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using the direct capitalization method. The significant unobservable input used in determining the collateral value was the capitalization rate which was 6.8%. The loan is on accrual status and we continue to receive contractual interest due. As of June 30, 2019 and December 31, 2018, this loan was assigned a risk rating of 5.

We recorded a $10.0 million loan loss provision and impairment against a commercial mortgage loan secured by a fully-built, for-sale residential condominium units located in Bethesda, MD. This was comprised of (i) $5.0 million loan loss recorded during the second quarter of 2018, and (ii) $2.0 million loan loss provision and $3.0 million of impairment recorded during the second quarter of 2017. The impairment was recorded on an investment previously recorded under other assets on our condensed consolidated balance sheet. After the loan loss provisions and related impairment, the amortized cost balance of the loan was $21.5 million and $27.2 million as of June 30, 2019 and December 31, 2018, respectively. The loan loss provision and impairment were based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision and related impairment). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were sales price per square foot and discount rate which were an average of $662 per square foot across properties and 15%, respectively. Effective April 1, 2017, we ceased accruing all interest associated with the loan and account for the loan on a cost-recovery basis (all proceeds are applied towards the loan balance). As of June 30, 2019 and December 31, 2018, this loan was assigned a risk rating of 5.

During 2016, we recorded a loan loss provision of $10.0 million on a commercial mortgage loan and $5.0 million on a contiguous subordinate loan secured by a multifamily property located in Williston, ND. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were terminal capitalization rate and discount rate which were 11% and 10%, respectively. We ceased accruing interest associated with the loan and only recognized interest income upon receipt of cash. As of December 31, 2018, the amortized cost of the loan, net of the loan loss provision, was $32.4 million and was assigned a risk rating of 5. During the second quarter of 2019, the underlying collateral was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

During the year ended December 31, 2018, we sold a $75.0 million ($17.7 million funded) subordinate position of our $265.0 million loans for the construction of an office campus in Renton, Washington. As of June 30, 2019, our exposure to the property is limited to a $190.0 million ($108.0 million funded) mortgage loan. This transaction was evaluated under ASC 860 - Transfers and Servicing and we determined that it qualifies as a sale and accounted for as such.

As of June 30, 2019 and December 31, 2018, the aggregate loan loss provision was $22.0 million and $37.0 million for commercial mortgage loans and subordinate loans, respectively.

We recognized payment-in-kind ("PIK") interest of $14.6 million and $29.1 million for the three and six months ended June 30, 2019, respectively, and $9.1 million and $19.7 million for the three and six months ended June 30, 2018, respectively.

We recognized $0 and $3.7 million pre-payment penalties and accelerated fees for the three and six months ended June 30, 2019, respectively and $1.6 million for each of the three and six months ended June 30, 2018.

Note 5 – Loan Proceeds Held by Servicer

Loan proceeds held by servicer represents principal payments held by our third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. Loan proceeds held by servicer were $4.6 million and $1.0

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million as of June 30, 2019 and December 31, 2018, respectively.

Note 6 – Other Assets

The following table details the components of our other assets at the dates indicated ($ in thousands):

	June 30, 2019		December 31, 2018
Interest receivable	$	39,047	$	33,399
Other	1,025		321
Total	$	40,072	$	33,720

Note 7 – Secured Debt Arrangements, Net

At June 30, 2019 and December 31, 2018, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):

	June 30, 2019 (2)						December 31, 2018 (2)
	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)
JPMorgan Facility (USD)	$	951,723	$	712,335		June 2024	$	1,333,503	$	680,141		June 2021
JPMorgan Facility (GBP)	48,277		48,277			June 2024	48,497		48,497			June 2021
DB Repurchase Facility (USD)	862,588		434,090			March 2021	904,181		419,823			March 2021
DB Repurchase Facility (GBP)	137,412		137,412			March 2021	150,819		150,819			March 2021
Goldman Facility	500,000		112,713			November 2021	300,000		210,072			November 2020
CS Facility (USD)	174,278		174,278			December 2019	187,117		187,117			June 2019
CS Facility (GBP)	144,364		144,364			December 2019	151,773		151,773			June 2019
HSBC Facility (GBP)	37,834		37,834			December 2019	48,835		48,835			December 2019
Sub-total	2,856,476		1,801,303				3,124,725		1,897,077
less: deferred financing costs	N/A		(18,246		)		N/A		(17,555		)
Total / Weighted-Average	$	2,856,476	$	1,783,057			$	3,124,725	$	1,879,522

———————

(1) Maturity date assumes extensions at our option are exercised.

(2) Weighted-average rates as of June 30, 2019 and December 31, 2018 were USD L + 2.10% / GBP L + 2.30% and USD L + 2.17% / GBP L + 2.28%, respectively.

JPMorgan Facility

In May 2017, through two indirect wholly-owned subsidiaries, we entered into a Fifth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). During the second quarter of 2019, we amended the JPMorgan Facility to allow for $1.0 billion of maximum borrowings and maturity in June 2022, plus two one-year extensions available at our option, subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars, British pounds ("GBP"), or Euros ("EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under the JPMorgan Facility.

As of June 30, 2019, we had $760.6 million (including £38.0 million assuming conversion into U.S. dollars) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.

DB Repurchase Facility

In April 2018, through an indirect wholly-owned subsidiary, we entered into a Second Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London Branch (as amended, the "DB Repurchase Facility"), which was upsized in September 2018, and provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in

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the United States, United Kingdom and the European Union, and enables us to elect to receive advances in U.S. dollars, British pounds, or Euros. The repurchase facility matures in March 2020, plus a one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $571.5 million (including £108.2 million assuming conversion into U.S. dollars) of borrowings outstanding under the DB Repurchase Facility secured by certain of our commercial mortgage loans.

Goldman Facility

In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which was upsized in March 2019 from $300.0 million to $500.0 million and matures in November 2019, plus two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of the seller under the Goldman Facility.

As of June 30, 2019, we had $112.7 million of borrowings outstanding under the Goldman Facility.

CS Facility - USD

In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $174.3 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.

CS Facility - GBP

In June 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - GBP"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $144.4 million (£113.7 million assuming conversion into U.S. dollars) of borrowings outstanding under the CS Facility - GBP secured by one of our commercial mortgage loans.

HSBC Facility

In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility"), which provides for a single asset financing. The facility matures in December 2019. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $37.8 million (£29.8 million assuming conversion into U.S. dollars) of borrowings outstanding under the HSBC Facility secured by one of our commercial mortgage loans.

At June 30, 2019, our borrowings had the following remaining maturities ($ in thousands):

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	Less than 1 year (1)		1 to 3 years (1)		3 to 5 years (1)		More than 5 years		Total
JPMorgan Facility	$	144,554	$	294,839	$	321,219	$	—	$	760,612
DB Repurchase Facility	106,304		465,198		—		—		571,502
Goldman Facility	—		112,713		—		—		112,713
CS Facility - USD	174,278		—		—		—		174,278
CS Facility - GBP	144,364		—		—		—		144,364
HSBC Facility	37,834		—		—		—		37,834
Total	$	607,334	$	872,750	$	321,219	$	—	$	1,801,303

———————

(1) Assumes underlying assets are financed through the fully extended maturity date of the facility.

The table below summarizes the outstanding balances at June 30, 2019, as well as the maximum and average month-end balances for the six months ended June 30, 2019 for our borrowings under secured debt arrangements ($ in thousands).

	As of June 30, 2019				For the six months ended June 30, 2019
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	$	760,612	$	1,612,150	$	929,496	$	836,744
DB Repurchase Facility	571,502		1,012,396		672,477		583,879
Goldman Facility	112,713		515,064		312,507		207,934
CS Facility - USD	174,278		238,441		188,037		184,049
CS Facility - GBP	144,364		206,422		150,811		145,599
HSBC Facility	37,834		53,946		50,784		47,830
Total	$	1,801,303	$	3,638,419

We were in compliance with the covenants under each of our secured debt arrangements at June 30, 2019 and December 31, 2018.

Note 8 – Senior Secured Term Loan, Net

In May 2019, we entered into a $500.0 million senior secured term loan (“Term Loan B”). The Term Loan B bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The Term Loan B matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.

Covenants

The Term Loan B includes, the following financial covenants: (i) our ratio of total non-recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.

We were in compliance with the covenants under the Term Loan B at June 30, 2019.

Interest Rate Swap

In connection with the Term Loan B, we entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the Term Loan B at 4.87%.

Note 9 – Convertible Senior Notes, Net

In two separate offerings during 2014, we issued an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019 (the "2019 Notes"), for which we received $248.6 million, after deducting the underwriting discount and offering expenses. The 2019 Notes were exchanged or converted for shares of our common stock and cash as follows:

(i) On August 2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the 2019 Notes pursuant to which we exchanged $206.2 million of the 2019 Notes for an aggregate of (a) 10,020,328 newly issued shares of our common stock, and (b) $39.3 million in cash. We recorded $166.0 million of additional

14

paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions,

(ii) Certain holders elected to convert $47.9 million of the 2019 Notes, which were settled for an aggregate of (a) 2,775,509 newly issued shares of our common stock, and (b) $0.2 million in cash. We recorded $13.9 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions. These conversions occurred from August 2018 through maturity.

The remaining $0.7 million in principal amount of the 2019 Notes were repaid at maturity on March 15, 2019.

During the year ended December 31, 2018, we recorded a loss on early extinguishment of debt of $2.6 million, in connection with the exchanges and conversions of the 2019 Notes. This includes fees and accelerated amortization of capitalized costs. There was no such loss related to the 2019 Notes during the three and six months ended June 30, 2019.

In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. At June 30, 2019, the 2022 Notes had a carrying value of $336.5 million and an unamortized discount of $8.5 million.

During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023 ("2023 Notes," and together with the 2019 Notes and 2022 Notes, the "Notes"), for which we received $223.7 million after deducting the underwriting discount and offering expenses. At June 30, 2019, the 2023 Notes had a carrying value of $223.1 million and an unamortized discount of $6.9 million.

The following table summarizes the terms of the Notes ($ in thousands):

	Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization
2022 Notes	$	345,000	4.75	%	5.60	%	50.2260	8/23/2022	3.15
2023 Notes	230,000		5.38	%	6.16	%	48.7187	10/15/2023	4.29
Total	$	575,000

———————

(1) Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.

(2) We have the option to settle any conversions in cash, shares of common stock or a combination thereof.  The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

In accordance with ASC 470 - Debt, the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) is to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. GAAP requires that the initial proceeds from the sale of the Notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by us at such time. We measured the fair value of the debt components of the Notes as of their issuance date based on effective interest rates.  As a result, we attributed approximately $15.4 million of the proceeds to the equity component of the Notes ($11.0 million to the 2022 Notes and $4.4 million to the 2023 Notes), which represents the excess proceeds received over the fair value of the liability component of the Notes at the date of issuance. The equity component of the Notes has been reflected within additional paid-in capital in the condensed consolidated balance sheet as of June 30, 2019. The resulting debt discount is being amortized over the period during which the Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the Notes will increase in subsequent reporting periods through the maturity date as the Notes accrete to their par value over the same period.

The aggregate contractual interest expense was approximately $7.2 million and $14.8 million for the three and six months ended June 30, 2019, respectively, as compared to approximately $7.6 million and $15.2 million for the three and six months ended June 30, 2018, respectively. With respect to the amortization of the discount on the liability component of the Notes as well as the amortization of deferred financing costs, we reported additional non-cash interest expense of approximately $1.4 million and $3.1 million for the three and six months ended June 30, 2019, respectively, as compared to $1.8 million and $3.7 million for the three and six months ended June 30, 2018, respectively.

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Note 10 – Derivatives

We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than U.S. dollars.

We have entered into a series of forward contracts to sell an amount of foreign currency (British pound and Euro) for an agreed upon amount of U.S. dollars at various dates through February 2023. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.

In connection with the Term Loan B, we entered into an interest rate swap to fix LIBOR at 2.12% or an all-in interest rate of 4.87%. We use interest rate swaps and caps to manage exposure to variable cash flows on portions of our borrowings under term loan debt. Interest rate swap and cap agreements allow us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. Gains or losses related to the interest rate swap are recorded net under interest expense in our condensed consolidated statement of operations.

The following table summarizes our non-designated foreign exchange ("Fx") forwards and our interest rate swap as of June 30, 2019:

	June 30, 2019
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	95	271,961	GBP	July 2019- December 2021	0.89
Fx Contracts - EUR	15	183,689	EUR	August 2019- February 2023	0.87
Interest Rate Swap	1	500,000	USD	May 2026	6.87

The following table summarizes our non-designated Fx forwards as of December 31, 2018:

	December 31, 2018
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	43	270,161	GBP	January 2019 - November 2020	0.69

We have not designated any of our derivative instruments as hedges as defined in ASC 815 "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to our derivatives for the three and six months ended June 30, 2019 and 2018 ($ in thousands):

		Amount of gain (loss) recognized in income					Amount of gain (loss) recognized in income
		Three months ended June 30,					Six months ended June 30,
	Location of Gain (Loss) Recognized in Income	2019		2018			2019			2018
Forward currency contracts	Gain (loss) on derivative instruments - unrealized	$	10,787	$	24,800		$	(4,198	)	$	15,941
Forward currency contracts	Gain on derivative instruments - realized	399		8,742			8,664			6,565
Interest rate caps(1)	Loss on derivative instruments - unrealized	—		(4		)	—			—
	Gain on derivative instruments	11,186		33,538			4,466			22,506

———————

(1) With a notional amount of $0.0 million and $37.5 million at June 30, 2019, and 2018, respectively.

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		Amount of loss recognized in income			Amount of loss recognized in income
		Three months ended June 30,			Six months ended June 30,
	Location of Loss Recognized in Income	2019		2018	2019		2018
Interest rate swap(1)	Unrealized loss on interest rate swap	(13,113	)	—	(13,113	)	—

———————

(1) With a notional amount of $500.0 million and $0.0 million at June 30, 2019, and 2018, respectively.

The following table summarizes the gross asset and liability amounts related to our derivatives at June 30, 2019 and December 31, 2018 ($ in thousands).

 

	June 30, 2019									December 31, 2018
	Gross Amount of Recognized Assets (Liabilities)			Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet			Gross Amount of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheet
Forward currency contracts	$	19,760		$	(258	)	$	19,502		$	23,753	$	(53	)	$	23,700
Interest rate swap	(13,113		)	—			(13,113		)	—		—			—

Note 11 – Accounts Payable, Accrued Expenses and Other Liabilities

The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):

	June 30, 2019		December 31, 2018
Accrued dividends payable	$	74,295	$	69,033
Collateral deposited under derivative agreements	1,820		20,000
Accrued interest payable	13,470		14,208
Accounts payable and other liabilities	7,151		1,505
Total	$	96,736	$	104,746

Note 12 – Related Party Transactions

Management Agreement

In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction and oversight of our board of directors.

Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.

The current term of the Management Agreement was renewed during the period and expires on September 29, 2019 and is automatically renewed for successive one-year terms on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as

17

of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting by our independent directors in February 2019, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.

We incurred approximately $10.3 million and $19.9 million in base management fees under the Management Agreement for the three and six months ended June 30, 2019, respectively, as compared to approximately $9.0 million and $17.1 million for the three and six months ended June 30, 2018, respectively.

In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us.

For the three and six months ended June 30, 2019, we paid expenses totaling $0.7 million and $1.4 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement as compared to $0.6 million and $1.2 million for the same periods in the prior year. These expenses are included in the general and administrative expenses line item of the condensed consolidated statement of operations.

Included in payable to related party on the condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 are approximately $10.3 million and $9.8 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.

Loans receivable

In June 2017, we increased our outstanding loan commitment through the acquisition of an additional $25.0 million of interests in an existing subordinate loan from a fund managed by an affiliate of the Manager, increasing our total outstanding loan commitment to $100.0 million. Furthermore, in September 2017 we funded an additional $25.0 million to acquire a portion of the same pre-development subordinate loan from a fund managed by an affiliate of the Manager, increasing our total outstanding loan commitment to $125.0 million. In May 2018, we increased our outstanding principal balance through the acquisition of an additional $28.2 million interest in the same subordinate loan from a fund managed by an affiliate of the Manager. The pre-development subordinate loan is for the construction of a residential condominium building in New York, New York and is part of a $300.0 million subordinate loan.

In June 2018, we increased our outstanding loan commitment through the acquisition of £4.8 million ($6.4 million assuming conversion into U.S. dollars) pari-passu interest in an existing subordinate loan from a fund managed by an affiliate of the Manager. The subordinate loan is secured by a healthcare portfolio located in the United Kingdom.

Term Loan Debt

In May 2019, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the five arrangers for the issuance of our Term Loan B and received $0.6 million of arrangement fees.

Note 13 – Share-Based Payments

On September 23, 2009, our board of directors approved the Apollo Commercial Real Estate Finance, Inc. 2009 Equity Incentive Plan ("2009 LTIP") and on April 16, 2019, our board of directors approved the Amended and Restated Apollo Commercial Real Estate Finance, Inc. 2019 Equity Incentive Plan ("2019 LTIP," and together with the 2009 LTIP, the "LTIPs"), which amended and restated the 2009 LTIP. Following the approval of the 2019 LTIP by our stockholders at our 2019 annual meeting of stockholders on June 12, 2019, no additional awards will be granted under the 2009 LTIP and all outstanding awards granted under the 2009 LTIP remain in effect in accordance with the terms in the 2009 LTIP.

The 2019 LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of 7,000,000 shares of our common stock. The LTIPs are administered by the compensation committee of our board of directors (the "Compensation Committee") and all grants under the LTIPs must be approved by the Compensation Committee.

We recognized stock-based compensation expense of $4.3 million and $8.2 million for the three and six months ended June 30, 2019, respectively, related to restricted stock and RSU vesting, as compared to $4.0 million and $7.4 million for the three and six months ended June 30, 2018. We adopted ASU 2018-07 on January 1, 2019 and the stock-based compensation expense for grants before the adoption of ASU 2018-07 is based on the closing price of our common stock of $16.66 on December 31, 2018, which was the last business day before we adopted ASU 2018-07. Refer to "Note 2 - Summary of Significant Accounting Policies" for further discussion on our adoption of ASU 2018-07.

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The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the six months ended June 30, 2019:

	Type	Restricted Stock		RSUs		Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2018		65,697		1,852,957
	Granted	27,245		—		500
	Vested	(47,586	)	—		N/A
	Forfeiture	—		(6,784	)	N/A
Outstanding at June 30, 2019		45,356		1,846,173

Below is a summary of restricted stock and RSU vesting dates as of June 30, 2019: 

Vesting Year	Restricted Stock	RSU	Total Awards
2019	20,000	885,976	905,976
2020	25,356	625,825	651,181
2021	—	334,372	334,372
Total	45,356	1,846,173	1,891,529

At June 30, 2019, we had unrecognized compensation expense of approximately $0.5 million and $23.3 million, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.

RSU Deliveries

During the six months ended June 30, 2019 and 2018, we delivered 433,426 and 345,996 shares of common stock for 730,717 and 603,677 vested RSUs, respectively. No RSUs were delivered during the three months ended June 30, 2019 and 2018. We allow RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on the condensed consolidated statement of changes in stockholders' equity. The adjustment was $5.0 million and $4.7 million for the six months ended June 30, 2019 and 2018, respectively. The adjustment is a reduction of capital related to our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in the condensed consolidated statement of changes in stockholders' equity.

Note 14 – Stockholders’ Equity

Our authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of June 30, 2019, 153,531,597 shares of common stock were issued and outstanding, 6,770,393 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock ("Series B Preferred Stock") were issued and outstanding.

On June 10, 2019, we redeemed all 6,900,000 shares of 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock ("Series C Preferred Stock") outstanding. Holders of the Series C Preferred Stock received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of $0.2223 per share.

Dividends. During 2019, we declared the following dividends:

	Three months ended
Dividend declared per share of:	June 30, 2019	March 31, 2019
Common Stock	$0.46	$0.46
Series B Preferred Stock	0.50	0.50
Series C Preferred Stock	0.2223	0.50

Common Stock Offerings. During the first quarter of 2018, we completed a follow-on public offering of 15,525,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a

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price of $17.77 per share. The aggregate net proceeds from the offering were $275.9 million after deducting offering expenses.

During the first quarter of 2019, we issued 1,967,361 shares of our common stock, at a per share conversion price of $17.17, related to conversions of the 2019 Notes, the remainder of which matured on March 15, 2019. We recorded a $33.8 million increase in additional paid in capital in the condensed consolidated statement of changes in stockholders' equity. Refer to "Note 9 - Convertible Senior Notes, Net" for a further discussion on the conversions of the 2019 Notes.

During the second quarter of 2019, we completed a follow-on public offering of 17,250,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of $18.27 per share. The aggregate net proceeds from the offering were $314.8 million after deducting offering expenses.

Note 15 – Commitments and Contingencies

Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No. 653251/2018) in New York Supreme Court.  The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, who are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project.  The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The defendants moved to dismiss the complaint on August 17, 2018, and the motion was fully briefed in October 2018. Oral argument took place on March 12, 2019, and the court’s decision is pending. We believe the claims are without merit and plan to vigorously defend the case. We do not believe this will have a material adverse effect on our condensed consolidated financial statements.

Loan Commitments. As described in "Note 4 - Commercial Mortgage and Subordinate Loans, Net," at June 30, 2019, we had $1.2 billion of unfunded commitments related to our commercial mortgage and subordinate loan portfolios.

Note 16 – Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on the condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 ($ in thousands):

	June 30, 2019						December 31, 2018
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Cash and cash equivalents	$	116,472		$	116,472		$	109,806		$	109,806
Commercial first mortgage loans, net	4,206,754			4,263,296			3,878,981			3,894,947
Subordinate loans, net	1,236,990			1,246,454			1,048,612			1,047,854
Secured debt arrangements	(1,783,057		)	(1,783,057		)	(1,897,077		)	(1,897,077		)
Senior secured term loan	(490,226		)	(496,875		)	—			—
2019 Notes	—			—			(34,278		)	(35,276		)
2022 Notes	(336,505		)	(344,786		)	(335,291		)	(326,025		)
2023 Notes	(223,114		)	(230,097		)	(222,431		)	(221,964		)

To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and convertible senior notes, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure."

Note 17 – Net Income per Share

ASC 260 "Earnings per share" requires the use of the two-class method of computing earnings per share for all periods

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presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.

The table below presents the computation of basic and diluted net income per share of common stock for the three and six months ended June 30, 2019 and 2018 ($ in thousands except per share data): 

	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Basic Earnings
Net Income	$	61,424		$	55,346		$	129,182		$	104,779
Less: Preferred dividends	(4,919		)	(6,834		)	(11,754		)	(13,669		)
Net income available to common stockholders	$	56,505		$	48,512		$	117,428		$	91,110
Less: Dividends on participating securities	(849		)	(738		)	(1,700		)	(1,489		)
Basic Earnings	$	55,656		$	47,774		$	115,728		$	89,621
Diluted Earnings
Net Income	$	61,424		$	55,346		$	129,182		$	104,779
Less: Preferred dividends	(4,919		)	(6,834		)	(11,754		)	(13,669		)
Net income available to common stockholders	$	56,505		$	48,512		$	117,428		$	91,110
Add: Interest expense on Notes	8,619			N/A			17,881			N/A
Diluted Earnings	$	65,124		$	48,512		$	135,309		$	91,110
Number of Shares:
Basic weighted-average shares of common stock outstanding	145,567,963			123,019,993			140,117,813			116,651,305
Diluted weighted-average shares of common stock outstanding	174,101,234			124,629,317			169,418,177			118,281,153
Earnings Per Share Attributable to Common Stockholders
Basic	$	0.38		$	0.39		$	0.83		$	0.78
Diluted	$	0.37		$	0.39		$	0.80		$	0.78

Prior to the three months ended September 30, 2018, we asserted our intent and ability to settle the principal amount of the Notes in cash and, as a result, the Notes did not have any impact on our diluted earnings per share. As of September 30, 2018, we no longer asserted our intent to fully settle the principal amount of the Notes in cash upon conversion. Accordingly, the dilutive effect to earnings per share for the current year periods is determined using the "if-converted" method whereby interest expense on the outstanding Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three and six months ended June 30, 2019, 28,533,271 and 29,300,363 weighted-average potentially issuable shares from the Notes were included in the dilutive earnings per share denominator, respectively. Refer to "Note 9 - Convertible Senior Notes, Net" for further discussion.

For the three and six months ended June 30, 2019, 1,846,173 and 1,847,860 weighted-average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive as compared to 1,609,324 and 1,629,848 for the same periods in the prior year.

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Note 18 – Subsequent Events

Investment activity. Subsequent to the quarter ended June 30, 2019, we committed capital of $51.5 million (all of which was funded at closing) to a subordinate lending investment.

In addition, we funded approximately $54.2 million for previously closed loans.

Loan Repayments. Subsequent to the end of the quarter, we received approximately $68.2 million from loan repayments.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING INFORMATION

We make forward-looking statements herein and will make forward-looking statements in future filings with the SEC, press releases or other written or oral communications within the meaning of Section 27A of the Securities Act of

1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, it intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy; the demand for commercial real estate loans; our business and investment strategy; our operating results; actions and initiatives of the U.S. government and governments outside of the United States, changes to government policies and the execution and impact of these actions, initiatives and policies; the state of the economy generally or in specific geographic regions; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements, including secured debt arrangements and securitizations; the availability of debt financing from traditional lenders; the volume of short-term loan extensions; the demand for new capital to replace maturing loans; expected leverage; general volatility of the securities markets in which we participate; changes in the value of our assets; the scope of our target assets; interest rate mismatches between our target assets and any borrowings used to fund such assets; changes in interest rates and the market value of our target assets; changes in prepayment rates on our target assets; effects of hedging instruments on our target assets; rates of default or decreased recovery rates on our target assets; the degree to which hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations, tax law and rates, accounting, legal or regulatory issues or guidance and similar matters; our continued maintenance of our qualification as a REIT for U.S. federal income tax purposes; our continued exclusion from registration under the Investment Company Act of 1940, as amended; the availability of opportunities to acquire commercial mortgage-related, real estate-related and other securities; the availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our present and potential future competition; and unexpected costs or unexpected liabilities, including those related to litigation.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. See "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2018. These and other risks, uncertainties and factors, including those described in the annual, quarterly and current reports that we file with the SEC, could cause our actual results to differ materially from those included in any forward-looking statements we make. All forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a Maryland corporation and have elected to be taxed as a REIT for U.S. federal income tax purposes. We primarily originate, acquire, invest in and manage performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.

We are externally managed and advised by the Manager, an indirect subsidiary of Apollo, a leading global alternative investment manager with a contrarian and value-oriented investment approach in private equity, credit and real estate with assets under management of approximately $303 billion as of March 31, 2019.

The Manager is led by an experienced team of senior real estate professionals who have significant expertise in underwriting and structuring commercial real estate financing transactions. We benefit from Apollo’s global infrastructure and operating platform, through which we are able to source, evaluate and manage potential investments in our target assets.

Market Overview

Based on the current market dynamics, including significant upcoming commercial real estate debt maturities, we believe there remains compelling opportunities for us to invest capital in our target assets at attractive risk adjusted returns. We continue to focus on underlying real estate value, and transactions that benefit from our ability to execute complex and sophisticated transactions.

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We believe the challenges faced by conduit lenders and the general uncertainty around value and pricing could create attractive risk adjusted investment opportunities for us. As a result, we expect to continue to see opportunities to originate first mortgage and subordinate financings in transactions which benefit from our ability to source, structure and execute complex transactions.

Critical Accounting Policies

A summary of our critical accounting policies is set forth in our Annual Report on Form 10-K for the year ended December 31, 2018 under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates." There have been no material changes to our critical accounting policies described in our Annual Report on Form 10-K filed with the SEC on February 13, 2019.

Results of Operations

All non-U.S. dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the prevailing exchange rate on the dates that they were recorded.

Loan Portfolio Overview

The following table sets forth certain information regarding our commercial real estate debt portfolio as of June 30, 2019 ($ in thousands):

Description	Amortized Cost		Weighted-Average Coupon (1)		Weighted Average All-in Yield (1)(2)		Secured Debt Arrangements (3)		Cost of Funds		Equity at cost(4)
Commercial mortgage loans, net	$	4,206,754	6.7	%	7.5	%	$	1,801,303	3.9	%	$	2,405,451
Subordinate loans, net	1,236,990		13.2	%	14.1	%	—		—		1,236,990
Total/Weighted-Average	$	5,443,744	8.2	%	9.0	%	$	1,801,303	3.9	%	$	3,642,441

———————    

(1) Weighted-Average Coupon and Weighted-Average All-in Yield are based on the applicable benchmark rates as of June 30, 2019 on the floating rate loans.

(2) Weighted-Average All-in Yield includes the amortization of deferred origination fees, loan origination costs and accrual of both extension and exit fees.

(3) Gross of deferred financing costs of $18.2 million.

(4) Represents loan portfolio at amortized cost less secured debt arrangements outstanding.

The following table provides details of our commercial mortgage and subordinate loan portfolios, on a loan-by-loan basis, as of June 30, 2019 ($ in millions):

Commercial Mortgage Loan Portfolio
Property Type	Risk Rating	Origination Date	Amortized Cost	Unfunded Commitment	Construction Loan(4)	Fully-extended Maturity	Location
Hotel	3	09/2016	$210	—		01/2022	Manhattan, NY
Residential-for-sale: inventory	3	03/2018	206	—		03/2021	London, UK
Urban Predevelopment	3	01/2016	198	—		08/2019	Miami, FL
Industrial	3	01/2019	195	7		02/2024	Brooklyn, NY
Office	3	06/2019	194	32		11/2026	Berlin, Germany
Office	3	10/2018	182	17		10/2021	Manhattan, NY
Urban Predevelopment	3	04/2017	178	—		09/2019	London, UK
Office	2	11/2017	174	74	Y	12/2022	Manhattan, NY
Office	3	11/2017	166	—		01/2023	Chicago, IL
Retail center (3)	5	11/2014	158	—		09/2020	Cincinnati, OH
Hotel	3	04/2018	151	2		04/2023	Honolulu, HI
Urban Predevelopment	3	03/2017	147	18		12/2020	Brooklyn, NY
Hotel (1)	3	09/2015	140	—		06/2023	Manhattan, NY

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Hotel	3	05/2018	139	—		06/2023	Miami, FL
Office	3	01/2018	106	82	Y	01/2022	Renton, WA
Hotel	3	03/2017	105	—		03/2022	Atlanta, GA
Office	3	10/2018	104	81	Y	10/2023	Manhattan, NY
Hotel	3	11/2018	99	—		12/2023	Vail, CO
Hotel	3	12/2017	89	—		12/2022	Manhattan, NY
Hotel	3	07/2018	87	—		08/2021	Detroit, MI
Residential-for-sale: construction	3	05/2018	78	5	Y	06/2020	Brooklyn, NY
Office	3	12/2017	75	55		03/2022	London, UK
Multifamily	3	04/2014	73	—		07/2023	Various
Urban Predevelopment	3	12/2016	73	—		12/2020	Los Angeles, CA
Residential-for-sale: construction	3	12/2018	70	107	Y	12/2023	Manhattan, NY
Multifamily	3	10/2017	67	—		11/2021	Brooklyn, NY
Office	3	03/2018	65	22		04/2023	Chicago, IL
Hotel	3	04/2018	63	—		05/2023	Scottsdale, AZ
Multifamily	3	11/2014	57	—		11/2021	Various
Residential-for-sale: inventory	3	06/2018	56	—		06/2020	Manhattan, NY
Multifamily	3	06/2018	54	—		06/2020	London, UK
Hotel	3	05/2019	52	—		06/2024	Chicago, IL
Multifamily	3	05/2016	51	1		09/2019	Brooklyn, NY
Residential-for-sale: inventory	3	05/2018	50	—		04/2021	Manhattan, NY
Other	3	04/2019	48	111	Y	09/2025	Culver City, CA
Hotel	3	12/2015	42	2		05/2024	St. Thomas, USVI
Multifamily	3	12/2017	42	—		01/2020	Manhattan, NY
Multifamily	3	10/2017	42	—		10/2022	London, UK
Residential-for-sale: construction	3	01/2018	40	40	Y	01/2023	Manhattan, NY
Hotel	3	02/2018	38	—		03/2023	Pittsburgh, PA
Residential-for-sale: inventory (3)	5	02/2014	21	—		04/2020	Bethesda, MD
Office	3	04/2019	17	56	Y	08/2022	Birmingham, UK
Residential-for-sale: construction	3	12/2018	8	94	Y	01/2024	Hallandale Beach, FL
Residential-for-sale: construction	3	03/2018	(1)	115	Y	03/2023	San Francisco, CA
Office	3	08/2018	(2)	196	Y	12/2022	London, UK
Sub total / Weighted-Average Commercial Mortgage Loans	3.0		$4,207	$1,117	15%	2.9 Years

Subordinate Loan Portfolio
Property Type	Risk Rating	Origination Date	Amortized Cost	Unfunded Commitment	Construction Loan(4)	Fully-extended Maturity	Location
Residential-for-sale: construction (2)	3	06/2015	$196	—	Y	02/2021	Manhattan, NY
Office	3	01/2019	99	—		12/2025	Manhattan, NY
Healthcare	3	01/2019	95	—		01/2024	Various
Residential-for-sale: construction	3	12/2017	90	22	Y	06/2022	Manhattan, NY
Residential-for-sale: construction	3	01/2016	86	—	Y	02/2020	Manhattan, NY
Other	3	09/2017	72	—		09/2022	Various
Multifamily	3	10/2015	68	1		11/2019	Manhattan, NY
Residential-for-sale: construction	3	12/2017	63	—	Y	04/2023	Los Angeles, CA

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Healthcare	2	01/2015	46	—		12/2019	Various
Residential-for-sale: construction (2)	3	11/2017	46	—	Y	02/2021	Manhattan, NY
Mixed Use	3	01/2017	42	—		02/2027	Cleveland, OH
Mixed Use	3	02/2019	37	—	Y	12/2022	London, UK
Residential-for-sale: inventory	3	10/2016	36	—		10/2020	Manhattan, NY
Industrial	2	05/2013	32	—		05/2023	Various
Residential-for-sale: construction	3	04/2019	32	8	Y	02/2020	Manhattan, NY
Residential-for-sale: inventory	3	06/2017	25	—		12/2020	Manhattan, NY
Hotel	3	06/2015	25	—		07/2025	Phoenix, AZ
Hotel	3	06/2015	20	—		12/2022	Washington, DC
Hotel	3	06/2018	20	—		06/2023	Las Vegas, NV
Multifamily	3	05/2018	20	—		05/2028	Cleveland, OH
Hotel	3	02/2015	20	—		01/2020	Burbank, CA
Mixed Use	3	12/2018	15	35	Y	12/2023	Brooklyn, NY
Hotel (1)	3	09/2015	15	9		06/2023	Manhattan, NY
Office	3	07/2013	14	—		07/2022	Manhattan, NY
Hotel	3	05/2017	8	—		06/2027	Anaheim, CA
Office	3	08/2017	8	—		09/2024	Troy, MI
Mixed Use	3	07/2012	7	—		08/2022	Chapel Hill, NC
Sub total / Weighted-Average Subordinate Loans	2.9		$1,237	$75	46%	3.0 Years
Total / Weighted-Average Loan Portfolio	3.0		$5,444	$1,192	22%	2.9 Years

———————

(1) Both loans are secured by the same property.

(2) Both loans are secured by the same property.

(3) Amortized cost for these loans is net of the recorded provisions for loan losses and impairments.

(4) Weighted-average construction loan % is based on the amortized cost of the loans.

Our average asset and debt balances for the six months ended June 30, 2019, were ($ in thousands):

	Average month-end balances for the six months ended June 30, 2019
Description	Assets		Related debt
Commercial mortgage loans, net	$	4,069,457	$	2,006,036
Subordinate loans, net	1,195,393		—

Investment Activity

During the six months ended June 30, 2019, we committed $1.0 billion of capital to loans ($787.9 million of which was funded during the six months ended June 30, 2019). In addition, during the six months ended June 30, 2019, we funded $188.3 million for loans closed prior to 2019, and received $490.1 million in repayments.

Net Income Available to Common Stockholders

For the three months ended June 30, 2019 and 2018, respectively, our net income available to common stockholders was $56.5 million, or $0.37 per diluted share of common stock, and $48.5 million, or $0.39 per diluted share of common stock. For the six months ended June 30, 2019 and 2018, respectively, our net income available to common stockholders was $117.4 million, or $0.80 per diluted share of common stock, and $91.1 million, or $0.78 per diluted share of common stock.

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Operating Results

The following table sets forth information regarding our consolidated results of operations and certain key operating metrics ($ in thousands):

	Three months ended June 30,						2019 vs 2018			Six months ended June 30,						2019 vs. 2018
	2019			2018						2019			2018
Net interest income:
Interest income from commercial mortgage loans	$	77,458		$	65,141		$	12,317		$	155,744		$	117,255		$	38,489
Interest income from subordinate loans	41,043			34,075			6,968			81,882			67,928			13,954
Interest expense	(33,511		)	(28,437		)	(5,074		)	(69,806		)	(51,177		)	(18,629		)
Net interest income	84,990			70,779			14,211			167,820			134,006			33,814
Operating expenses:
General and administrative expenses	(6,574		)	(5,652		)	(922		)	(12,725		)	(10,650		)	(2,075		)
Management fees to related party	(10,259		)	(9,013		)	(1,246		)	(19,872		)	(17,105		)	(2,767		)
Total operating expenses	(16,833		)	(14,665		)	(2,168		)	(32,597		)	(27,755		)	(4,842		)
Other income	484			343			141			1,002			546			456
Reversal of (Provision for) loan losses and impairments	15,000			(5,000		)	20,000			15,000			(5,000		)	20,000
Realized loss on investments	(12,513		)	—			(12,513		)	(12,513		)	—			(12,513		)
Foreign currency loss	(7,777		)	(29,649		)	21,872			(883		)	(19,524		)	18,641
Gain on foreign currency forwards	11,186			33,538			(22,352		)	4,466			22,506			(18,040		)
Unrealized loss on interest rate swap	(13,113		)	—			(13,113		)	(13,113		)	—			(13,113		)
Net income	$	61,424		$	55,346		$	6,078		$	129,182		$	104,779		$	24,403

Net Interest Income

Net interest income increased by $14.2 million and $33.8 million during the three and six months ended June 30, 2019, respectively, as compared to the same periods in 2018. The increase was primarily due to (i) a net increase in the principal balance of our loan portfolio by $0.6 billion, and (ii) a 0.35% increase in average one-month LIBOR for the six months ended June 30, 2019 compared to June 30, 2018. This was offset by (i) an increase in interest expense due to an increase in our net debt balance of $295.4 million as of June 30, 2019 compared to June 30, 2018, and (ii) the increase in average one-month LIBOR discussed above.

We recognized payment-in-kind interest of $14.6 million and $29.1 million for the three and six months ended June 30, 2019, respectively, and $9.1 million and $19.7 million for the three and six months ended June 30, 2018, respectively.

We recognized $0 and $3.7 million pre-payment penalties and accelerated fees for the three and six months ended June 30, 2019, respectively and $1.6 million for each of the three and six months ended June 30, 2018.

Operating Expenses

General and administrative expenses

General and administrative expenses increased by $0.9 million for the three months ended June 30, 2019 compared to the same period in 2018. The increase was primarily driven by an increase of $0.3 million of non-cash restricted stock and RSU amortization related to shares of common stock awarded under the 2009 LTIP and a $0.6 million increase in general operating expenses. The increase in general operating expenses for the three months ended June 30, 2019 was primarily due to broken deal related costs of approximately $0.7 million incurred in 2019.

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General and administrative expenses increased by $2.1 million for the six months ended June 30, 2019 compared to the same period in 2018. The increase was primarily driven by an increase of $0.9 million of non-cash restricted stock and RSU amortization related to shares of common stock awarded under the LTIPs and a $1.2 million increase in general operating expenses. This increase includes the $0.7 million of broken deal related costs discussed above.

Management fees to related party

Management fee expense increased by $1.2 million and $2.8 million during the three and six months ended June 30, 2019, respectively, as compared to the same period in 2018. The increase is primarily attributable to an increase in our stockholders’ equity (as defined in the Management Agreement) as a result of the issuance of 2,775,509 shares of our common stock related to exchanges and conversions of the 2019 Notes (as described in "Note 9 - Convertible Senior Notes, Net" to the accompanying condensed consolidated financial statements) from August 2018 through March 2019 and the follow-on public offering of 17,250,000 shares in May 2019 (as described in "Note 14 - Stockholders' Equity") partially offset by the redemption of the Series C Preferred Stock in June 2019 (as described in "Note 14 - Stockholders' Equity").

Management fees and the relationship between us and the Manager under the Management Agreement are discussed further in the accompanying condensed consolidated financial statements, in "Note 12 - Related Party Transactions."

Reversal of (Provision for) loan losses and impairments and Realized loss on investments

During the second quarter of 2019, the collateral underlying an impaired loan was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

Foreign currency gain and (loss) on derivative instruments

We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than U.S. dollars. When foreign currency gain and (loss) on derivative instruments are evaluated on a combined basis, the net impact for the three and six months ended June 30, 2019 were $3.4 million and $3.6 million, respectively, and the net impact for the three and six months ended June 30, 2018 were $3.9 million and $3.0 million, respectively.

Unrealized loss on interest rate swap

We use an interest rate swap to manage exposure to variable cash flows on portions of our borrowings under term loan debt. The interest rate swap agreement allows us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure.

Dividends

We have declared the following dividends in 2019:

	Three months ended
Dividend declared per share of:	June 30, 2019	March 31, 2019
Common Stock	$0.46	$0.46
Series B Preferred Stock	0.50	0.50
Series C Preferred Stock	0.22	0.50

Subsequent Events

Refer to "Note 18 - Subsequent Events" to the accompanying condensed consolidated financial statements for disclosure regarding significant transactions that occurred subsequent to June 30, 2019.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. Our cash is used to purchase or originate target assets, repay principal and interest on borrowings, make distributions to stockholders and fund operations. We closely monitor our liquidity position and we believe we have sufficient current liquidity and access to additional liquidity to meet financial obligations for at least the next 12 months.

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Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio:

	June 30, 2019	December 31, 2018
Debt to Equity Ratio (1)	1.0x	0.9x

———————

(1) Represents total debt less cash and loan proceeds held by servicer to total stockholders' equity.

Our primary sources of liquidity are as follows:

Cash Generated from Operations

Cash from operations is generally comprised of interest income from our investments, net of any associated financing expense, principal repayments from our investments, net of associated financing repayments, proceeds from the sale of investments, and changes in working capital balances. See "Results of Operations – Investments" above for a summary of interest rates related to our investment portfolio as of June 30, 2019.

Borrowings Under Various Financing Arrangements

JPMorgan Facility

In May 2017, through two indirect wholly-owned subsidiaries, we entered into a Fifth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association. During the second quarter of 2019, we amended the JPMorgan Facility to allow for $1.0 billion of maximum borrowings and maturity in June 2022, plus two one-year extensions available at our option, subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars, British pounds, or Euros. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under the JPMorgan Facility.

As of June 30, 2019, we had $760.6 million (including £38.0 million assuming conversion into U.S. dollars) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.

DB Repurchase Facility

In April 2018, through an indirect wholly-owned subsidiary, we entered into a Second Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London Branch, which was upsized in September 2018, and provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in the United States, United Kingdom and the European Union, and enables us to elect to receive advances in U.S. dollars, British pounds, or Euros. The repurchase facility matures in March 2020, plus a one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $571.5 million (including £108.2 million assuming conversion into U.S. dollars) of borrowings outstanding under the DB Repurchase Facility secured by certain of our commercial mortgage loans.

Goldman Facility

In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA, which was upsized in March 2019 from $300.0 million to $500.0 million and matures in November 2019, plus two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of the seller under the Goldman Facility.

As of June 30, 2019, we had $112.7 million of borrowings outstanding under the Goldman Facility.

CS Facility - USD

In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd, which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

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As of June 30, 2019, we had $174.3 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.

CS Facility - GBP

In June 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd, which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $144.4 million (£113.7 million assuming conversion into U.S. dollars) of borrowings outstanding under the CS Facility - GBP secured by one of our commercial mortgage loans.

HSBC Facility

In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc, which provides for a single asset financing. The facility matures in December 2019. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $37.8 million (£29.8 million assuming conversion into U.S. dollars) of borrowings outstanding under the HSBC Facility secured by one of our commercial mortgage loans.

Secured Debt Arrangements Covenants

Each of the guarantees related to our secured debt arrangements contain the following uniform financial covenants (i) tangible net worth must be greater than $1.25 billion plus 75% of the net cash proceeds of any equity issuance after March 31, 2017 (ii) our ratio of total indebtedness to tangible net worth cannot be greater than 3:1; and (iii) our liquidity cannot be less than an amount equal to the greater of 5% of total recourse indebtedness or $30.0 million.

Term Loan B

In May 2019, we entered into the $500.0 million Term Loan B. The Term Loan B bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The Term Loan B matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.

The Term Loan B includes the following financial covenants: (i) our ratio of total non-recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.

Convertible Senior Notes

In two separate offerings during 2014, we issued an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019, for which we received $248.6 million, after deducting the underwriting discount and offering expenses. The 2019 Notes were exchanged or converted for shares of our common stock and cash as follows:

(i) On August 2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the 2019 Notes pursuant to which we exchanged $206.2 million of the 2019 Notes for an aggregate of (a) 10,020,328 newly issued shares of our common stock, and (b) $39.3 million in cash. We recorded $166.0 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions,

(ii) Certain holders elected to convert $47.9 million of the 2019 Notes, which were settled for an aggregate of (a) 2,775,509 newly issued shares of our common stock, and (b) $0.2 million in cash. We recorded $13.9 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions. These conversions occurred from August 2018 through maturity.

The remaining $0.7 million in principal amount of the 2019 Notes were repaid at maturity on March 15, 2019.

During the year ended December 31, 2018, we recorded a loss on early extinguishment of debt of $2.6 million, in connection with the exchanges and conversions of the 2019 Notes. This includes fees and accelerated amortization of

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capitalized costs. There was no such loss related to the 2019 Notes during the three months ended June 30, 2019.

In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022, for which we received $337.5 million, after deducting the underwriting discount and offering expenses. At June 30, 2019, the 2022 Notes had a carrying value of $336.5 million and an unamortized discount of $8.5 million.

During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023, for which we received $223.7 million after deducting the underwriting discount and offering expenses. At June 30, 2019, the 2023 Notes had a carrying value of $223.1 million and an unamortized discount of $6.9 million.

Cash Generated from Equity Offerings

During the first quarter of 2018, we completed a follow-on public offering of 15,525,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of $17.77 per share. The aggregate net proceeds from the offering were $275.9 million after deducting offering expenses.

During the second quarter of 2019, we completed a follow-on public offering of 17,250,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of $18.27 per share. The aggregate net proceeds from the offering were $314.8 million after deducting offering expenses.

Other Potential Sources of Financing

Our primary sources of cash currently consist of cash available, which was $116.5 million as of June 30, 2019, principal and interest payments we receive on our portfolio of assets, and available borrowings under our secured debt arrangements. We expect our other sources of cash to consist of cash generated from operations and prepayments of principal received on our portfolio of assets. Such prepayments are difficult to estimate in advance. Depending on market conditions, we may utilize additional borrowings as a source of cash, which may also include additional secured debt arrangements as well as other borrowings such as credit facilities, or conduct additional public and private debt and equity offerings.

We maintain policies relating to our borrowings and use of leverage. See "Leverage Policies" below. In the future, we may seek to raise further equity or debt capital or engage in other forms of borrowings in order to fund future investments or to refinance expiring indebtedness.

We generally intend to hold our target assets as long-term investments, although we may sell certain of our investments in order to manage our interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.

To maintain our qualification as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit our ability to retain earnings and replenish or increase capital for operations.

Leverage Policies

We use leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. In addition to our secured debt arrangements, in the future we may access additional sources of borrowings. Our charter and bylaws do not limit the amount of indebtedness we can incur; however, we are limited by certain financial covenants under our secured debt arrangements. Consistent with our strategy of keeping leverage within a prudent range, we expect to, depending upon the composition of our portfolio, maintain our debt-to-equity ratio at less than 2.0x.

Investment Guidelines

Our current investment guidelines, approved by our board of directors, are comprised of the following:

• no investment will be made that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes;

• no investment will be made that would cause us to register as an investment company under the 1940 Act;

• investments will be predominantly in our target assets;

• no more than 20% of our cash equity (on a consolidated basis) will be invested in any single investment at the time of the investment; and

• until appropriate investments can be identified, the Manager may invest the proceeds of any offering in interest bearing, short-term investments, including money market accounts and/or funds, that are consistent with our intention to qualify as a REIT.

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The board of directors must approve any change in these investment guidelines.

Contractual Obligations and Commitments

Our contractual obligations including expected interest payments as of June 30, 2019 are summarized as follows ($ in thousands):

	Less than 1 year (1)		1 to 3 years (1)		3 to 5 years (1)		More than 5 years (1)		Total
Secured debt arrangements (2)	$	669,174	$	935,439	$	50,584	$	—	$	1,655,197
Senior secured term loan(3)	24,880		49,626		49,693		546,417		670,616
Convertible senior notes	28,750		57,500		594,002		—		680,252
Unfunded loan commitments (4)	665,703		504,326		22,089		—		1,192,118
Total	$	1,388,507	$	1,546,891	$	716,368	$	546,417	$	4,198,183

———————

(1) Assumes underlying assets are financed through the fully extended maturity date of the secured debt arrangement.

(2) Based on the applicable benchmark rates as of June 30, 2019 on the floating rate debt for interest payments due.

(3) In connection with the Term Loan B, we entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the Term Loan B at 4.87%.

(4) Based on our expected funding schedule, which is based upon the Manager’s estimates based upon the best information available to the Manager at the time. There is no assurance that the payments will occur in accordance with these estimates or at all, which could affect our operating results.

Loan Commitments. As of June 30, 2019, we had $1.2 billion of unfunded loan commitments, comprised of $1.1 billion related to our commercial mortgage loan portfolio, and $75.2 million related to our subordinate loan portfolio.

Management Agreement. On September 23, 2009, we entered into the Management Agreement with the Manager pursuant to which the Manager is entitled to receive a management fee and the reimbursement of certain expenses. The table above does not include amounts due under the Management Agreement as those obligations do not have fixed and determinable payments. Pursuant to the Management Agreement, the Manager is entitled to a base management fee calculated and payable quarterly in arrears in an amount equal to 1.5% of our stockholders’ equity (as defined in the Management Agreement), per annum. The Manager will use the proceeds from its management fee in part to pay compensation to its officers and personnel. We do not reimburse the Manager or its affiliates for the salaries and other compensation of their personnel, except for the allocable share of the compensation of (1) our Chief Financial Officer based on the percentage of time spent on our affairs and (2) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment professional personnel of the Manager or its affiliates who spend all or a portion of their time managing our affairs based on the percentage of time devoted by such personnel to our affairs. We are also required to reimburse the Manager for operating expenses related to us incurred by the Manager, including expenses relating to legal, accounting, due diligence and other services. Expense reimbursements to the Manager are made in cash on a monthly basis following the end of each month. Our reimbursement obligation is not subject to any dollar limitation.

The current term of the Management Agreement currently runs through September 29, 2019. Absent certain action by the independent directors of our board of directors, as described below, the Management Agreement will automatically renew on each anniversary for a one-year term. The Management Agreement may be terminated upon expiration of the one-year term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to us or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. Amounts payable under the Management Agreement are not fixed and determinable. Following a meeting by our independent directors in February 2019, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to terminate the Management Agreement.

Forward Currency Contracts. We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than U.S. dollars. We have entered into a series of forward contracts to sell an amount of foreign currency (British pounds and Euros) for an agreed upon amount of U.S. dollars at various dates through December 2021. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments. Refer to "Note 10- Derivatives, Net"

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to the accompanying condensed consolidated financial statements for details regarding our forward currency contracts.

Unrealized loss on interest rate swap. In connection with the Term Loan B, we entered into an interest rate swap to fix LIBOR at 2.12%, effectively fixing our all-in coupon on the Term Loan B at 4.87%. Refer to "Note 10- Derivatives, Net" to the accompanying condensed consolidated financial statements for details regarding our interest rate swap.

Off-balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment to provide additional funding to any such entities.

Dividends

We intend to continue to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We generally intend over time to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Any distributions we make are at the discretion of our board of directors and depend upon, among other things, our actual results of operations. These results and our ability to pay distributions are affected by various factors, including the net interest and other income from our portfolio, our operating expenses and any other expenditures. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

As of June 30, 2019, we had 6,770,393 shares of Series B Preferred Stock outstanding, which entitles holders to receive dividends that are payable quarterly in arrears. The Series B Preferred Stock pay cumulative cash dividends, which are payable quarterly in equal amounts in arrears on the 15th day of each January, April, July and October: (i) from, and including, the original date of issuance of the Series B Preferred Stock to, but excluding, September 20, 2020, at an initial rate of 8.00% per annum of the $25.00 per share liquidation preference; and (ii) from, and including, September 20, 2020, at the rate per annum equal to the greater of (a) 8.00% and (b) a floating rate equal to the 3-month LIBOR rate as calculated on each applicable date of determination plus 6.46% of the $25.00 liquidation preference. Except under certain limited circumstances, the Series B Preferred Stock is generally not convertible into or exchangeable for any other property or any other of our securities at the election of the holders. On or after September 21, 2020, we may, at our option, redeem the shares at a redemption price of $25.00, plus any accrued unpaid distribution through the date of the redemption.

On June 10, 2019, we redeemed all 6,900,000 shares of Series C Preferred Stock outstanding. Holders of the Series C Preferred Stock received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of $0.2223.

Non-GAAP Financial Measures

Operating Earnings

For the three and six months ended June 30, 2019, our Operating Earnings were $56.6 million, or $0.38 per share, and $125.0 million, or $0.88 per share, respectively, as compared to $54.9 million, or $0.44 per share, and $102.9 million, or $0.87 per share, for the same periods in the prior year, respectively. Operating Earnings is a non-GAAP financial measure that we define as net income available to common stockholders, computed in accordance with GAAP, adjusted for (i) equity-based compensation expense (a portion of which may become cash-based upon final vesting and settlement of awards should the holder elect net share settlement to satisfy income tax withholding), (ii) any unrealized gains or losses or other non-cash items included in net income available to common stockholders, (iii) unrealized income from unconsolidated joint ventures, (iv) foreign currency gains (losses), other than (a) realized gains/(losses) related to interest income, and (b) forward point gains/(losses) realized on our foreign currency hedges, (v) the non-cash amortization expense related to the reclassification of a portion of the Notes to stockholders’ equity in accordance with GAAP, and (vi) provision for loan losses and impairments. Beginning with the quarter ended September 30, 2016, we slightly modified our definition of Operating Earnings to include realized gains (losses) on currency swaps related to interest income on investments denominated in a currency other than U.S. dollars. In addition, beginning with the quarter ended December 31, 2018, we further modified our definition of Operating Earnings to include the impact from forward points on our foreign currency hedges, which reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the rate exposure to USD LIBOR, resulting in additional interest income earned in U.S. dollar terms. These amounts are

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not included in GAAP net income. In order to conform to the 2018 year-end presentation, which incorporates this modification, prior-year Operating Earnings results presented below have been modified accordingly. Operating Earnings may also be adjusted to exclude certain other non-cash items, as determined by the Manager and approved by a majority of our independent directors.

The weighted-average diluted shares outstanding used for Operating Earnings per weighted-average diluted share has been adjusted from weighted-average diluted shares under GAAP to exclude shares issued from a potential conversion of the Notes. Consistent with the treatment of other unrealized adjustments to Operating Earnings, these potentially issuable shares are excluded until a conversion occurs, which we believe is a useful presentation for investors. We believe that excluding shares issued in connection with a potential conversion of the Notes from our computation of Operating Earnings per weighted-average diluted share is useful to investors for various reasons, including the following: (i) conversion of Notes to shares requires both the holder of a Note to elect to convert the Note and for us to elect to settle the conversion in the form of shares; (ii) future conversion decisions by Note holders will be based on our stock price in the future, which is presently not determinable; (iii) the exclusion of shares issued in connection with a potential conversion of the Notes from the computation of Operating Earnings per weighted-average diluted share is consistent with how we treat other unrealized items in our computation of Operating Earnings per weighted-average diluted share; and (iv) we believe that when evaluating our operating performance, investors and potential investors consider our Operating Earnings relative to our actual distributions, which are based on shares outstanding and not shares that might be issued in the future. The table below summarizes the reconciliation from weighted-average diluted shares under GAAP to the weighted-average diluted shares used for Operating Earnings ($ in thousands, except Price):

	Three months ended June 30, 2019(1)					Six months ended June 30, 2019(1)
Weighted-Averages	Face		Price	Shares		Face		Price	Shares
Weighted-average diluted shares - GAAP				174,101,234					169,418,177
2019 Notes (2)	$	—	N/A	—		$	13,170	$17.17	(767,093	)
2022 Notes	$	345,000	$19.91	(17,327,970	)	$	345,000	$19.91	(17,327,970	)
2023 Notes	$	230,000	$20.53	(11,205,301	)	$	230,000	$20.53	(11,205,301	)
Unvested RSUs	—		—	1,846,173					1,847,860
Weighted-average diluted shares - Operating Earnings				147,414,136					141,965,673

———————

(1) This reconciliation only applies to the three and six months ended June 30, 2019 because in the reporting period for the three and six months ended June 30, 2018 we used the treasury stock method when determining the potential share dilution from the Notes in the computation of earnings per share.

(2) Face represents the weighted-average balances during the period.

Computation of Share Count for Operating Earnings
	Three months ended June 30,		Six months ended June 30,
	2019	2018	2019	2018
Basic weighted-average shares of common stock outstanding	145,567,963	123,019,993	140,117,813	116,651,305
Weighted-average unvested RSUs	1,846,173	1,609,324	1,847,860	1,629,848
Weighted-average diluted shares - Operating Earnings	147,414,136	124,629,317	141,965,673	118,281,153

In order to evaluate the effective yield of the portfolio, we use Operating Earnings to reflect the net investment income of our portfolio as adjusted to include the net interest expense related to our derivative instruments. Operating Earnings allows us to isolate the net interest expense associated with our swaps in order to monitor and project our full cost of borrowings. We also believe that our investors use Operating Earnings, or a comparable supplemental performance measure, to evaluate and compare the performance of our company and our peers and, as such, we believe that the disclosure of Operating Earnings is useful to our investors. Forward points effectively convert our foreign rate exposure to USD LIBOR, which we believe is a better reflection of our operating results and we believe the inclusion of the resulting gain or loss in Operating Earnings is useful to our investors. We believe it is useful to our investors to present Operating Earnings excluding realized loss on investments to reflect our operating results. Our operating results are primarily comprised of earning interest income on our investments net of borrowing and administrative costs.

34

A significant limitation associated with Operating Earnings as a measure of our financial performance over any period is that it excludes unrealized gains (losses) from investments. In addition, our presentation of Operating Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, Operating Earnings should not be considered as a substitute for our GAAP net income as a measure of our financial performance or any measure of our liquidity under GAAP.

The table below summarizes the reconciliation from net income available to common stockholders to Operating Earnings ($ in thousands):

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Net income available to common stockholders	$	56,505		$	48,512		$	117,428		$	91,110
Adjustments:
Equity-based compensation expense	4,294			4,014			8,195			7,356
Unrealized loss on interest rate swap	13,113			—			13,113			—
Gain on currency forwards	(11,186		)	(33,538		)	(4,466		)	(22,506		)
Foreign currency loss, net	7,777			29,649			883			19,524
Net realized gains (losses) relating to interest income on foreign currency hedges, net (1)	325			148			744			(89		)
Net realized gains relating to forward points on foreign currency hedges, net	44			1			2,476			175
Amortization of the convertible senior notes related to equity reclassification	721			1,156			1,630			2,296
(Reversal of) Provision for loan losses and impairments	(15,000		)	5,000			(15,000		)	5,000
Total adjustments:	88			6,430			7,575			11,756
Operating Earnings	$	56,593		$	54,942		$	125,003		$	102,866
Realized loss on investments	12,513			—			12,513			—
Operating Earnings excluding realized loss on investments	$	69,106		$	54,942		$	137,516		$	102,866
Diluted Operating Earnings per share of common stock (2)	$	0.38		$	0.44		$	0.88		$	0.87
Diluted Operating Earnings excluding realized loss on investments	$	0.47		$	0.44		$	0.97		$	0.87
Basic weighted-average shares of common stock outstanding	145,567,963			123,019,993			140,117,813			116,651,305
Weighted-average diluted shares - Operating Earnings	147,414,136			124,629,317			141,965,673			118,281,153

———————

(1) In order to conform to the 2019 presentation of the reconciliation from net income available to common stockholders to Operating Earnings, $0.1 million and $(0.1) million was reclassified from Foreign currency gain, net for the three and six months ended June 30, 2018, respectively.

(2) For the computation of diluted Operating Earnings per share of common stock, for the three and six months ended June 30, 2019, $7.9 million and $16.4 million, respectively, of interest expense related to the Notes is not deducted from the numerator and the potentially dilutive shares related to the Notes are excluded from the denominator.

Book Value Per Share

The table below calculates our book value per share ($ in thousands, except per share data):

	June 30, 2019			December 31, 2018
Stockholders' Equity	$	2,671,399		$	2,509,747
Series B Preferred Stock (Liquidation Preference)	(169,260		)	(169,260		)
Series C Preferred Stock (Liquidation Preference)	—			(172,500		)
Common Stockholders' Equity	$	2,502,139		$	2,167,987
Common Stock	153,531,597			133,853,565
Book value per share	$	16.30		$	16.20

35

The table below shows the changes in our book value per share:

	Book value per share
Book value per share at December 31, 2018	$	16.20
Vesting and issuance of common shares under the LTIPs	(0.09		)
Shares issued related to the conversion of the 2019 Notes	0.01
Other	0.01
Book value per share at March 31, 2019	$	16.13
Common stock offering, net of subsequent dividend	0.20
Reversal of loan losses and impairments	0.02
Gain on foreign currency forwards, net	0.02
Unrealized loss on interest rate swap	(0.08		)
Other	0.01
Book value per share at June 30, 2019	$	16.30

36

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value, while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While risks are inherent in any business enterprise, we seek to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks we undertake.

Credit Risk

One of our strategic focuses is acquiring assets that we believe to be of high credit quality. We believe this strategy will generally keep our credit losses and financing costs low. However, we are subject to varying degrees of credit risk in connection with our other target assets. We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses, and by deploying a value-driven approach to underwriting and diligence, consistent with the Manager’s historical investment strategy, with a focus on current cash flows and potential risks to cash flow. The Manager seeks to enhance its due diligence and underwriting efforts by accessing the Manager’s knowledge base and industry contacts. Nevertheless, unanticipated credit losses could occur, which could adversely impact our operating results.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our target assets and our related financing obligations.

To the extent consistent with maintaining our REIT qualification, we seek to manage risk exposure to protect our portfolio of financial assets against the effects of major interest rate changes. We generally seek to manage this risk by:

• attempting to structure our financing agreements to have a range of different maturities, terms, amortizations and interest rate adjustment periods;

• using hedging instruments, interest rate swaps and interest rate caps; and

• to the extent available, using securitization financing to better match the maturity of our financing with the duration of our assets.

The following table estimates the hypothetical impact on our net interest income for the twelve-month period following June 30, 2019, assuming an immediate increase or decrease of 50 basis points in the applicable interest rate benchmark by currency ($ in thousands, except per share data):

			50 basis point increase				50 basis point decrease
Currency	Net floating rate assets subject to interest rate sensitivity		Increase to net interest income (1)(2)		Increase to net interest income (per share) (1)(2)		Decrease to net interest income (1)(2)			Decrease to net interest income (per share) (1)(2)
USD	$	2,798,729	$	13,843	$	0.09	$	(11,676	)	$	(0.08	)
GBP	291,421		1,441		0.01		(570		)	—
EUR	195,294		212		—		—			—
Total:	$	3,285,444	$	15,496	$	0.10	$	(12,246	)	$	(0.08	)

———————

(1) Any such hypothetical impact on interest rates on our variable rate borrowings does not consider the effect of any change in overall economic activity that could occur in a rising or falling interest rate environment. Further, in the event of a change in interest rates of that magnitude, we may take actions to further mitigate our exposure to such a change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in our financial structure.

(2) Certain of our floating rate loans are subject to a LIBOR floor.

Prepayment Risk

Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on an asset to be less than expected. In certain cases, we adapt to prepayment risk by stating prepayment penalties in loan agreements.

37

Market Risk

Commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans or loans, as the case may be, which could also cause us to suffer losses.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and distributions are determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income, excluding net capital gains and determined without regard to the dividends paid deduction, on an annual basis in order to maintain our REIT qualification. In each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

Currency Risk

Some of our loans and secured debt arrangements are denominated in a foreign currency and subject to risks related to

fluctuations in currency rates. We mitigate this exposure through foreign currency forward contracts, which match the net

principal and interest of our foreign currency loans and secured debt arrangements.

38

Item 4. Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer, based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to ARI that would potentially be subject to disclosure under the Exchange Act, and the rules and regulations promulgated thereunder.

During the period ended June 30, 2019, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within ARI to disclose material information otherwise required to be set forth in our periodic reports.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No. 653251/2018) in New York Supreme Court.  The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, who are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project.  The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The defendants moved to dismiss the complaint on August 17, 2018, and the motion was fully briefed in October 2018. Oral argument took place on March 12, 2019, and the court’s decision is pending. We believe the claims are without merit and plan to vigorously defend the case.

Item 1A. Risk Factors

See our Annual Report on Form 10-K for the year ended December 31, 2018. There have been no material changes to our risk factors during the six months ended June 30, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

39

Item 6. Exhibits

3.1	Articles of Amendment and Restatement of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).
3.2	Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 23, 2015 (File No.: 001-34452).
3.3	Articles Supplementary designating Apollo Commercial Real Estate Finance, Inc.’s 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 1, 2016 (File No.: 001-34452).
3.4	By-laws of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 3.2 of the Registrant’s Form S-4 (Registration No. 333-210632).
4.1	Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc., incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-11, as amended (Registration No. 333-160533).
4.2	Specimen Stock Certificate of Apollo Commercial Real Estate Finance, Inc.’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on September 23, 2015.
4.3	Form of stock certificate evidencing the 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed on August 26, 2016 (File No.: 001-34452).
4.4	Indenture, dated as of March 17, 2014, between the Registrant and Wells Fargo Bank, National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).
4.5	First Supplemental Indenture, dated as of March 17, 2014, between the Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 5.50% Convertible Senior Note due 2019), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 21, 2014 (File No.: 001-34452).
4.6	Second Supplemental Indenture, dated as of August 21, 2017, between the Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 4.75% Convertible Senior Note due 2022), incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on August 21, 2017 (File No.: 001-34452).
4.7	Third Supplemental Indenture, dated as of October 5, 2018 between the Registrant and Wells Fargo Bank, National Association, as Trustee (including the form of 5.375% Convertible Senior Notes due 2023), incorporated by reference to Exhibit 4.2 of the Registrant's Form 8-K filed on October 5, 2018 (File No.: 001-34452).
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.
101.INS*	Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase

40

101.PRE* XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
July 24, 2019
	By:	/s/ Stuart A. Rothstein
		Stuart A. Rothstein
		President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Jai Agarwal
		Jai Agarwal
		Chief Financial Officer, Treasurer and Secretary
		(Principal Financial Officer and Principal Accounting Officer)

42

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Stuart A. Rothstein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Apollo Commercial Real Estate Finance, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 24, 2019	By:	/s/ Stuart A. Rothstein
	Name:	Stuart A. Rothstein
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Jai Agarwal, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Apollo Commercial Real Estate Finance, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 24, 2019	By:	/s/ Jai Agarwal
	Name:	Jai Agarwal
	Title:	Chief Financial Officer, Treasurer and Secretary

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the President and Chief Executive Officer of Apollo Commercial Real Estate Finance, Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the "Form 10-Q"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 24, 2019	By:	/s/ Stuart A. Rothstein
	Name:	Stuart A. Rothstein
	Title:	President and Chief Executive Officer

The undersigned, the Chief Financial Officer, Treasurer and Secretary of Apollo Commercial Real Estate Finance, Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the "Form 10-Q"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 24, 2019	By:	/s/ Jai Agarwal
	Name:	Jai Agarwal
	Title:	Chief Financial Officer, Treasurer and Secretary

Pursuant to the Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 23, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	001-34452
Entity Registrant Name	Apollo Commercial Real Estate Finance, Inc.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	27-0467113
Entity Address, Address Line One	9 West 57th Street
Entity Address, Address Line Two	43rd Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10019
City Area Code	212
Local Phone Number	515–3200
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	ARI
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Small Business Entity	false
Emerging Growth Company	false
Entity Shell Company	false
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001467760
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		153,531,597

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets:
Cash and cash equivalents	$ 116,472	$ 109,806
Commercial mortgage loans and subordinate loans, net	5,443,744	4,927,593
Other assets	40,072	33,720
Derivative assets	19,502	23,700
Loan proceeds held by servicer	4,619	1,000
Total Assets	5,624,409	5,095,819
Liabilities:
Secured debt arrangements, net (net of deferred financing costs of $18,246 and $17,555 in 2019 and 2018, respectively)	1,783,057	1,879,522
Convertible senior notes, net	559,619	592,000
Senior secured term loan, net (net of deferred financing costs of $7,333 and $0 in 2019 and 2018, respectively)	490,226	0
Derivative liabilities	13,113	0
Accounts payable, accrued expenses and other liabilities	96,736	104,746
Payable to related party	10,259	9,804
Total Liabilities	2,953,010	2,586,072
Commitments and Contingencies (see Note 15)
Stockholders’ Equity:
Common stock, $0.01 par value, 450,000,000 shares authorized, 153,531,597 and 133,853,565 shares issued and outstanding in 2019 and 2018, respectively	1,535	1,339
Additional paid-in-capital	2,817,542	2,638,441
Accumulated deficit	(147,746)	(130,170)
Total Stockholders’ Equity	2,671,399	2,509,747
Total Liabilities and Stockholders’ Equity	5,624,409	5,095,819
Commercial Mortgage Portfolio Segment
Assets:
Commercial mortgage loans and subordinate loans, net	4,206,754	3,878,981
Subordinate Mortgage Portfolio Segment
Assets:
Commercial mortgage loans and subordinate loans, net	1,236,990	1,048,612
Series B Preferred Stock
Stockholders’ Equity:
Preferred stock	68	68
Series C Preferred Stock
Stockholders’ Equity:
Preferred stock	$ 0	$ 69

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Deferred financing costs	$ 18,246	$ 17,555
Deferred financing costs	$ 7,333	$ 0
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	450,000,000	450,000,000
Common stock, shares issued (in shares)	153,531,597	133,853,565
Common stock, shares outstanding (in shares)	153,531,597	133,853,565
Series B Preferred Stock
Preferred stock, shares issued (in shares)	6,770,393	6,770,393
Preferred stock, shares outstanding (in shares)	6,770,393	6,770,393
Preferred stock, liquidation preference	$ 169,260	$ 169,260
Series C Preferred Stock
Preferred stock, shares issued (in shares)	0	6,900,000
Preferred stock, shares outstanding (in shares)	0	6,900,000
Preferred stock, liquidation preference	$ 0	$ 172,500
Commercial Mortgage Portfolio Segment
Loans pledged as collateral	$ 3,638,419	$ 3,197,900

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Condensed Consolidated Statement of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net interest income:
Interest income from commercial mortgage loans	$ 77,458	$ 65,141	$ 155,744	$ 117,255
Interest income from subordinate loans	41,043	34,075	81,882	67,928
Interest expense	(33,511)	(28,437)	(69,806)	(51,177)
Net interest income	84,990	70,779	167,820	134,006
Operating expenses:
General and administrative expenses (includes equity-based compensation of $4,294 and $8,195 in 2019 and $4,014 and $7,356 in 2018, respectively)	(6,574)	(5,652)	(12,725)	(10,650)
Management fees to related party	(10,259)	(9,013)	(19,872)	(17,105)
Total operating expenses	(16,833)	(14,665)	(32,597)	(27,755)
Other income	484	343	1,002	546
Reversal of (Provision for) loan losses and impairments	15,000	(5,000)	15,000	(5,000)
Realized loss on investments	(12,513)	0	(12,513)	0
Foreign currency loss	(7,777)	(29,649)	(883)	(19,524)
Net income	61,424	55,346	129,182	104,779
Preferred dividends	(4,919)	(6,834)	(11,754)	(13,669)
Net income available to common stockholders	$ 56,505	$ 48,512	$ 117,428	$ 91,110
Net income per share of common stock:
Basic (in dollars per share)	$ 0.38	$ 0.39	$ 0.83	$ 0.78
Diluted (in dollars per share)	$ 0.37	$ 0.39	$ 0.80	$ 0.78
Basic weighted-average shares of common stock outstanding (in shares)	145,567,963	123,019,993	140,117,813	116,651,305
Diluted weighted-average shares of common stock outstanding	174,101,234	124,629,317	169,418,177	118,281,153
Dividend declared per share of common stock (in dollars per share)	$ 0.46	$ 0.46	$ 0.92	$ 0.92
Forward Currency Contract
Operating expenses:
Gain on foreign currency forwards (includes unrealized gains (losses) of $10,787 and $(4,198) in 2019 and $24,796 and $15,941 in 2018, respectively)	$ 11,186	$ 33,538	$ 4,466	$ 22,506
Interest Rate Swap
Operating expenses:
Gain on foreign currency forwards (includes unrealized gains (losses) of $10,787 and $(4,198) in 2019 and $24,796 and $15,941 in 2018, respectively)	$ (13,113)	$ 0	$ (13,113)	$ 0

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Condensed Consolidated Statement of Operations (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
General and administrative expenses, equity-based compensation	$ 4,294	$ 4,014	$ 8,195	$ 7,356
Unrealized gain (loss) on derivatives	$ 10,787	$ 24,796	$ (4,198)	$ 15,941

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Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid In Capital	Accumulated Deficit
Stockholders' equity, beginning balance (in shares) at Dec. 31, 2017		13,670,393	107,121,235
Stockholders' equity, beginning balance at Dec. 31, 2017	$ 2,088,143	$ 137	$ 1,071	$ 2,170,078	$ (83,143)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Capital increase (decrease) related to Equity Incentive Plan (in shares)			345,996
Capital increase (decrease) related to Equity Incentive Plan	(1,385)		$ 4	(1,389)
Issuance of common stock (in shares)			15,525,000
Issuance of common stock	275,879		$ 155	275,724
Offering costs	(377)			(377)
Net income	49,433				49,433
Dividends declared on preferred stock	(6,835)				(6,835)
Dividends declared on common stock - $0.46 per share	(57,328)				(57,328)
Stockholders' equity, ending balance (in shares) at Mar. 31, 2018		13,670,393	122,992,231
Stockholders' equity, ending balance at Mar. 31, 2018	2,347,530	$ 137	$ 1,230	2,444,036	(97,873)
Stockholders' equity, beginning balance (in shares) at Dec. 31, 2017		13,670,393	107,121,235
Stockholders' equity, beginning balance at Dec. 31, 2017	2,088,143	$ 137	$ 1,071	2,170,078	(83,143)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	104,779
Stockholders' equity, ending balance (in shares) at Jun. 30, 2018		13,670,393	123,020,301
Stockholders' equity, ending balance at Jun. 30, 2018	2,342,653	$ 137	$ 1,230	2,447,973	(106,687)
Stockholders' equity, beginning balance (in shares) at Mar. 31, 2018		13,670,393	122,992,231
Stockholders' equity, beginning balance at Mar. 31, 2018	2,347,530	$ 137	$ 1,230	2,444,036	(97,873)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Capital increase (decrease) related to Equity Incentive Plan (in shares)			28,070
Capital increase (decrease) related to Equity Incentive Plan	4,013			4,013
Offering costs	(76)			(76)
Net income	55,346				55,346
Dividends declared on preferred stock	(6,834)				(6,834)
Dividends declared on common stock - $0.46 per share	(57,326)				(57,326)
Stockholders' equity, ending balance (in shares) at Jun. 30, 2018		13,670,393	123,020,301
Stockholders' equity, ending balance at Jun. 30, 2018	2,342,653	$ 137	$ 1,230	2,447,973	(106,687)
Stockholders' equity, beginning balance (in shares) at Dec. 31, 2018		13,670,393	133,853,565
Stockholders' equity, beginning balance at Dec. 31, 2018	2,509,747	$ 137	$ 1,339	2,638,441	(130,170)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Capital increase (decrease) related to Equity Incentive Plan (in shares)			433,426
Capital increase (decrease) related to Equity Incentive Plan	(1,095)		$ 4	(1,099)
Conversions of convertible senior notes for common stock (in shares)			1,967,361
Conversions of convertible senior notes for common stock	33,778		$ 20	33,758
Net income	67,758				67,758
Dividends declared on preferred stock	(6,835)				(6,835)
Dividends declared on common stock - $0.46 per share	(63,529)				(63,529)
Stockholders' equity, ending balance (in shares) at Mar. 31, 2019		13,670,393	136,254,352
Stockholders' equity, ending balance at Mar. 31, 2019	2,539,824	$ 137	$ 1,363	2,671,100	(132,776)
Stockholders' equity, beginning balance (in shares) at Dec. 31, 2018		13,670,393	133,853,565
Stockholders' equity, beginning balance at Dec. 31, 2018	2,509,747	$ 137	$ 1,339	2,638,441	(130,170)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	129,182
Stockholders' equity, ending balance (in shares) at Jun. 30, 2019		6,770,393	153,531,597
Stockholders' equity, ending balance at Jun. 30, 2019	2,671,399	$ 68	$ 1,535	2,817,542	(147,746)
Stockholders' equity, beginning balance (in shares) at Mar. 31, 2019		13,670,393	136,254,352
Stockholders' equity, beginning balance at Mar. 31, 2019	2,539,824	$ 137	$ 1,363	2,671,100	(132,776)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Capital increase (decrease) related to Equity Incentive Plan (in shares)			27,245
Capital increase (decrease) related to Equity Incentive Plan	4,294		$ 0	4,294
Issuance of common stock (in shares)			17,250,000
Issuance of common stock	315,157		$ 172	314,985
Redemption of preferred stock (in shares)		(6,900,000)
Redemption of preferred stock	(172,500)	$ (69)		(172,431)
Offering costs	(406)			(406)
Net income	61,424				61,424
Dividends declared on preferred stock	(4,919)				(4,919)
Dividends declared on common stock - $0.46 per share	(71,475)				(71,475)
Stockholders' equity, ending balance (in shares) at Jun. 30, 2019		6,770,393	153,531,597
Stockholders' equity, ending balance at Jun. 30, 2019	$ 2,671,399	$ 68	$ 1,535	$ 2,817,542	$ (147,746)

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Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividends declared on common stock (in dollars per share)	$ 0.46	$ 0.46	$ 0.46	$ 0.46

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Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows (used in) provided by operating activities:
Net income	$ 129,182	$ 104,779
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of discount/premium and PIK	(40,490)	(30,192)
Amortization of deferred financing costs	5,487	5,355
Equity-based compensation	3,195	2,628
(Reversal of) Provision for loan losses and impairments	(15,000)	5,000
Realized loss on Investments	12,513	0
Foreign currency gain	3,068	17,371
Unrealized (gain) loss on derivative instruments	17,311	(15,941)
Changes in operating assets and liabilities:
Proceeds received from PIK	0	75,652
Other assets	(6,460)	(4,069)
Accounts payable, accrued expenses and other liabilities	668	10,190
Payable to related party	455	845
Net cash (used in) provided by operating activities	109,929	171,618
Cash flows used in investing activities:
New funding of commercial mortgage loans	(511,310)	(1,275,507)
Add-on funding of commercial mortgage loans	(175,497)	(60,500)
New funding of subordinate loans	(276,607)	(201,966)
Add-on funding of subordinate loans	(12,825)	(43,284)
Proceeds and payments received on commercial mortgage loans	341,453	227,913
Proceeds and payments received on subordinate loans	130,567	367,143
Origination and exit fees received on commercial mortgage and subordinate loans	12,275	28,362
Decrease in collateral held related to derivative contracts	(18,180)	4,930
Net cash (used in) provided by investing activities	(510,124)	(952,909)
Cash flows from financing activities:
Proceeds from issuance of common stock	315,157	275,879
Redemption of preferred stock	(172,500)	0
Payment of offering costs	(141)	(188)
Proceeds from secured debt arrangements	981,529	1,367,211
Repayments of secured debt arrangements	(1,063,071)	(723,260)
Proceeds from issuance of senior secured term loan	497,500	0
Exchanges and conversions of convertible senior notes	(704)	0
Payment of deferred financing costs	(9,416)	(11,314)
Dividends on common stock	(126,289)	(114,655)
Dividends on preferred stock	(15,204)	(13,669)
Net cash (used in) provided by financing activities	406,861	780,004
Net increase (decrease) in cash and cash equivalents	6,666	(1,287)
Cash and cash equivalents, beginning of period	109,806	77,671
Cash and cash equivalents, end of period	116,472	76,384
Supplemental disclosure of cash flow information:
Interest paid	62,915	43,420
Supplemental disclosure of non-cash financing activities:
Exchange of convertible senior notes for common stock	33,778	0
Dividend declared, not yet paid	74,295	64,162
Offering costs payable	265	0
Loan proceeds held by servicer	4,619	0
Deferred financing costs, not yet paid	$ 4,095	$ 0

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Organization

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Apollo Commercial Real Estate Finance, Inc. (together with its consolidated subsidiaries, is referred to throughout this report as the "Company," "ARI," "we," "us" and "our") is a corporation that has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes and primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. These asset classes are referred to as our target assets.

We were formed in Maryland on June 29, 2009, commenced operations on September 29, 2009 and are externally managed and advised by ACREFI Management, LLC (the "Manager"), an indirect subsidiary of Apollo Global Management, LLC (together with its subsidiaries, "Apollo").

We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2009. To maintain our tax qualification as a REIT, we are required to distribute at least 90% of our taxable income, excluding net capital gains, to stockholders and meet certain other asset, income, and ownership tests.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include loan loss reserves and impairment. Actual results could differ from those estimates.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year or any other future period.

We currently operate in one reporting segment.

Recent Accounting Pronouncements

In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07 "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting" ("ASU 2018-07"). The intention of ASU 2018-07 is to expand the scope of Topic 718 to include share-based payment transactions in exchange for goods and services from nonemployees. These share-based payments will now be measured at grant-date fair value of the equity instrument issued. Upon adoption, only liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established should be remeasured through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 and is applied retrospectively. We adopted ASU 2018-07 in the first quarter of 2019 and it did not have any impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326)" ("ASU 2016-13"). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  The guidance will replace the "incurred loss" approach under existing guidance with an "expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The guidance is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. While we are currently evaluating the impact ASU 2016-13 will have on our condensed consolidated financial statements, we expect that the adoption will result in higher provisions for expected loan losses.

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Fair Value Disclosure

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Disclosure

Fair Value Disclosure

GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair values. Market based, or observable inputs are the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy as noted in ASC 820 "Fair Value Measurements and Disclosures" are described below:

Level I — Quoted prices in active markets for identical assets or liabilities.

Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.

While we anticipate that our valuation methods will be appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.

The estimated fair values of our derivative instruments are determined using a discounted cash flow analysis on the

expected cash flows of each derivative. The fair values of foreign exchange forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries. The fair value of the interest rate swap is determined by comparing the present value of remaining fixed payments to the present value of expected floating rate payments based on the forward one-month LIBOR curve. Our derivative instruments are classified as Level II in the fair value hierarchy.

The following table summarizes the levels in the fair value hierarchy into which our financial instruments were categorized as of June 30, 2019 and December 31, 2018 ($ in thousands): 

	Fair Value as of June 30, 2019										Fair Value as of December 31, 2018
	Level I		Level II			Level III		Total			Level I		Level II		Level III		Total
Foreign currency forward assets, net	$	—	$	19,502		$	—	$	19,502		$	—	$	23,700	$	—	$	23,700
Interest rate swap liability	—		(13,113		)	—		(13,113		)	—		—		—		—

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Commercial Mortgage and Subordinate Loans, Net

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Commercial Mortgage and Subordinate Loans, Net

Commercial Mortgage and Subordinate Loans, Net

Our loan portfolio was comprised of the following at June 30, 2019 and December 31, 2018 ($ in thousands):

Loan Type	June 30, 2019		December 31, 2018
Commercial mortgage loans, net	$	4,206,754	$	3,878,981
Subordinate loans, net	1,236,990		1,048,612
Total loans, net	$	5,443,744	$	4,927,593

Our loan portfolio consisted of 93% and 91% floating rate loans, based on amortized cost, as of June 30, 2019 and December 31, 2018, respectively.

Activity relating to our loan investment portfolio, for the six months ended June 30, 2019, was as follows ($ in thousands):

	Principal Balance		Deferred Fees/Other Items (1)			Provision for Loan Loss (2)			Carrying Value
December 31, 2018	$	4,982,514	$	(17,940	)	$	(36,981	)	$	4,927,593
New loan fundings	787,917		—			—			787,917
Add-on loan fundings (3)	188,322		—			—			188,322

Loan repayments	(490,087		)	—			—			(490,087		)
Gain (loss) on foreign currency translation	(2,806		)	(58		)	—			(2,864		)
Provision for loan loss / (Realized loss on Investment) (2)	(12,513		)	—			15,000			2,487
Deferred fees	—			(12,275		)	—			(12,275		)
PIK interest and amortization of fees	29,201			13,450			—			42,651
June 30, 2019	$	5,482,548		$	(16,823	)	$	(21,981	)	$	5,443,744

———————

(1) Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.

(2) In addition to the $22.0 million provision for loan loss, we recorded an impairment of $3.0 million against an investment previously recorded under other assets on our condensed consolidated balance sheet. During the second quarter of 2019, the underlying collateral on a commercial mortgage loan and a contiguous subordinate loan secured by a multifamily property located in Williston, ND was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

(3) Represents fundings for loans closed prior to 2019.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):

	June 30, 2019			December 31, 2018
Number of loans	71			69
Principal balance	$	5,482,548		$	4,982,514
Carrying value	$	5,443,744		$	4,927,593
Unfunded loan commitments (1)	$	1,192,118		$	1,095,598
Weighted-average cash coupon (2)	8.2		%	8.4		%
Weighted-average remaining term (3)	2.9 years			2.8 years

  ———————

(1) Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.

(2) For floating rate loans, based on applicable benchmark rates as of the specified dates.

(3) Assumes all extension options are exercised.

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

	June 30, 2019				December 31, 2018
Property Type	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Hotel	$	1,322,167	24.3	%	$	1,286,590	26.1	%
Residential-for-sale: construction	706,260		12.9	%	528,510		10.7	%
Residential-for-sale: inventory	395,375		7.3	%	577,053		11.7	%
Office	1,202,311		22.2	%	832,620		16.9	%
Urban Predevelopment	595,263		10.8	%	683,886		13.9	%
Multifamily	472,785		8.7	%	448,899		9.1	%
Industrial	227,451		4.2	%	32,000		0.6	%
Retail Center	158,128		2.9	%	156,067		3.2	%
Healthcare	142,933		2.6	%	156,814		3.2	%
Other	120,041		2.2	%	151,197		3.1	%
Mixed Use	101,030		1.9	%	73,957		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

	June 30, 2019				December 31, 2018
Geographic Location	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Manhattan, NY	$	1,883,438	34.6	%	$	1,669,145	33.9	%
Brooklyn, NY	553,859		10.2	%	346,056		7.0	%
Northeast	18,738		0.3	%	23,479		0.5	%
West	696,804		12.8	%	614,160		12.5	%
Midwest	638,981		11.8	%	631,710		12.8	%
Southeast	501,878		9.2	%	559,043		11.3	%
Southwest	119,910		2.2	%	96,345		2.0	%
Mid Atlantic	108,056		2.0	%	211,775		4.3	%
United Kingdom	654,952		12.0	%	700,460		14.2	%
Other International	267,128		4.9	%	75,420		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

1.    Very low risk

2.    Low risk

3. Moderate/average risk

4. High risk/potential for loss: a loan that has a risk of realizing a principal loss

5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or has been impaired

The following table allocates the carrying value of our loan portfolio based on our internal risk ratings at the dates indicated ($ in thousands):

	June 30, 2019					December 31, 2018
Risk Rating	Number of Loans	Carrying Value		% of Loan Portfolio		Number of Loans	Carrying Value		% of Loan Portfolio
1	—	$	—	—	%	—	$	—	—	%
2	3	253,817		5	%	3	138,040		3	%
3	66	5,010,351		92	%	63	4,573,930		93	%
4	—	—		—	%	—	—		—	%
5	2	179,576		3	%	3	215,623		4	%
	71	$	5,443,744	100	%	69	$	4,927,593	100	%
Weighted-average risk rating				3.0					3.1

We evaluate our loans for possible impairment on a quarterly basis. We regularly evaluate the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash 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 property’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 properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such loan loss analysis is completed and reviewed by asset

management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property 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. An allowance for loan loss is established when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan.

We evaluate modifications to our loan portfolio to determine if the modifications constitute a troubled debt restructuring ("TDR") and/or substantial modification, under ASC Topic 310, "Receivables." During the second quarter of 2018, we determined that a modification of one commercial mortgage loan, secured by a retail center in Cincinnati, OH, with a principal balance of $171.2 million constituted a TDR as the interest rate spread was reduced from 5.5% over LIBOR to 3.0% over LIBOR. The entity in which we own an interest and which owns the underlying property was deemed to be a variable interest entity ("VIE") and it was determined that we are not the primary beneficiary of that VIE. During the fourth quarter of 2018, we recorded a $15.0 million loan loss provision against this loan. After the loan loss provision, the amortized cost of the loan was $158.1 million and $156.1 million as of June 30, 2019 and December 31, 2018, respectively. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using the direct capitalization method. The significant unobservable input used in determining the collateral value was the capitalization rate which was 6.8%. The loan is on accrual status and we continue to receive contractual interest due. As of June 30, 2019 and December 31, 2018, this loan was assigned a risk rating of 5.

We recorded a $10.0 million loan loss provision and impairment against a commercial mortgage loan secured by a fully-built, for-sale residential condominium units located in Bethesda, MD. This was comprised of (i) $5.0 million loan loss recorded during the second quarter of 2018, and (ii) $2.0 million loan loss provision and $3.0 million of impairment recorded during the second quarter of 2017. The impairment was recorded on an investment previously recorded under other assets on our condensed consolidated balance sheet. After the loan loss provisions and related impairment, the amortized cost balance of the loan was $21.5 million and $27.2 million as of June 30, 2019 and December 31, 2018, respectively. The loan loss provision and impairment were based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision and related impairment). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were sales price per square foot and discount rate which were an average of $662 per square foot across properties and 15%, respectively. Effective April 1, 2017, we ceased accruing all interest associated with the loan and account for the loan on a cost-recovery basis (all proceeds are applied towards the loan balance). As of June 30, 2019 and December 31, 2018, this loan was assigned a risk rating of 5.

During 2016, we recorded a loan loss provision of $10.0 million on a commercial mortgage loan and $5.0 million on a contiguous subordinate loan secured by a multifamily property located in Williston, ND. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were terminal capitalization rate and discount rate which were 11% and 10%, respectively. We ceased accruing interest associated with the loan and only recognized interest income upon receipt of cash. As of December 31, 2018, the amortized cost of the loan, net of the loan loss provision, was $32.4 million and was assigned a risk rating of 5. During the second quarter of 2019, the underlying collateral was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

During the year ended December 31, 2018, we sold a $75.0 million ($17.7 million funded) subordinate position of our $265.0 million loans for the construction of an office campus in Renton, Washington. As of June 30, 2019, our exposure to the property is limited to a $190.0 million ($108.0 million funded) mortgage loan. This transaction was evaluated under ASC 860 - Transfers and Servicing and we determined that it qualifies as a sale and accounted for as such.

As of June 30, 2019 and December 31, 2018, the aggregate loan loss provision was $22.0 million and $37.0 million for commercial mortgage loans and subordinate loans, respectively.

We recognized payment-in-kind ("PIK") interest of $14.6 million and $29.1 million for the three and six months ended June 30, 2019, respectively, and $9.1 million and $19.7 million for the three and six months ended June 30, 2018, respectively.

We recognized $0 and $3.7 million pre-payment penalties and accelerated fees for the three and six months ended June 30, 2019, respectively and $1.6 million for each of the three and six months ended June 30, 2018.Loan Proceeds Held by Servicer

Loan proceeds held by servicer represents principal payments held by our third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. Loan proceeds held by servicer were $4.6 million and $1.0

million as of June 30, 2019 and December 31, 2018, respectively.

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Loan Proceeds Held by Servicer

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Loan Proceeds Held by Servicer

Commercial Mortgage and Subordinate Loans, Net

Our loan portfolio was comprised of the following at June 30, 2019 and December 31, 2018 ($ in thousands):

Loan Type	June 30, 2019		December 31, 2018
Commercial mortgage loans, net	$	4,206,754	$	3,878,981
Subordinate loans, net	1,236,990		1,048,612
Total loans, net	$	5,443,744	$	4,927,593

Our loan portfolio consisted of 93% and 91% floating rate loans, based on amortized cost, as of June 30, 2019 and December 31, 2018, respectively.

Activity relating to our loan investment portfolio, for the six months ended June 30, 2019, was as follows ($ in thousands):

	Principal Balance		Deferred Fees/Other Items (1)			Provision for Loan Loss (2)			Carrying Value
December 31, 2018	$	4,982,514	$	(17,940	)	$	(36,981	)	$	4,927,593
New loan fundings	787,917		—			—			787,917
Add-on loan fundings (3)	188,322		—			—			188,322

Loan repayments	(490,087		)	—			—			(490,087		)
Gain (loss) on foreign currency translation	(2,806		)	(58		)	—			(2,864		)
Provision for loan loss / (Realized loss on Investment) (2)	(12,513		)	—			15,000			2,487
Deferred fees	—			(12,275		)	—			(12,275		)
PIK interest and amortization of fees	29,201			13,450			—			42,651
June 30, 2019	$	5,482,548		$	(16,823	)	$	(21,981	)	$	5,443,744

———————

(1) Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.

(2) In addition to the $22.0 million provision for loan loss, we recorded an impairment of $3.0 million against an investment previously recorded under other assets on our condensed consolidated balance sheet. During the second quarter of 2019, the underlying collateral on a commercial mortgage loan and a contiguous subordinate loan secured by a multifamily property located in Williston, ND was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

(3) Represents fundings for loans closed prior to 2019.

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):

	June 30, 2019			December 31, 2018
Number of loans	71			69
Principal balance	$	5,482,548		$	4,982,514
Carrying value	$	5,443,744		$	4,927,593
Unfunded loan commitments (1)	$	1,192,118		$	1,095,598
Weighted-average cash coupon (2)	8.2		%	8.4		%
Weighted-average remaining term (3)	2.9 years			2.8 years

  ———————

(1) Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.

(2) For floating rate loans, based on applicable benchmark rates as of the specified dates.

(3) Assumes all extension options are exercised.

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

	June 30, 2019				December 31, 2018
Property Type	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Hotel	$	1,322,167	24.3	%	$	1,286,590	26.1	%
Residential-for-sale: construction	706,260		12.9	%	528,510		10.7	%
Residential-for-sale: inventory	395,375		7.3	%	577,053		11.7	%
Office	1,202,311		22.2	%	832,620		16.9	%
Urban Predevelopment	595,263		10.8	%	683,886		13.9	%
Multifamily	472,785		8.7	%	448,899		9.1	%
Industrial	227,451		4.2	%	32,000		0.6	%
Retail Center	158,128		2.9	%	156,067		3.2	%
Healthcare	142,933		2.6	%	156,814		3.2	%
Other	120,041		2.2	%	151,197		3.1	%
Mixed Use	101,030		1.9	%	73,957		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

	June 30, 2019				December 31, 2018
Geographic Location	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Manhattan, NY	$	1,883,438	34.6	%	$	1,669,145	33.9	%
Brooklyn, NY	553,859		10.2	%	346,056		7.0	%
Northeast	18,738		0.3	%	23,479		0.5	%
West	696,804		12.8	%	614,160		12.5	%
Midwest	638,981		11.8	%	631,710		12.8	%
Southeast	501,878		9.2	%	559,043		11.3	%
Southwest	119,910		2.2	%	96,345		2.0	%
Mid Atlantic	108,056		2.0	%	211,775		4.3	%
United Kingdom	654,952		12.0	%	700,460		14.2	%
Other International	267,128		4.9	%	75,420		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

We assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio ("LTV"), debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

1.    Very low risk

2.    Low risk

3. Moderate/average risk

4. High risk/potential for loss: a loan that has a risk of realizing a principal loss

5. Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or has been impaired

The following table allocates the carrying value of our loan portfolio based on our internal risk ratings at the dates indicated ($ in thousands):

	June 30, 2019					December 31, 2018
Risk Rating	Number of Loans	Carrying Value		% of Loan Portfolio		Number of Loans	Carrying Value		% of Loan Portfolio
1	—	$	—	—	%	—	$	—	—	%
2	3	253,817		5	%	3	138,040		3	%
3	66	5,010,351		92	%	63	4,573,930		93	%
4	—	—		—	%	—	—		—	%
5	2	179,576		3	%	3	215,623		4	%
	71	$	5,443,744	100	%	69	$	4,927,593	100	%
Weighted-average risk rating				3.0					3.1

We evaluate our loans for possible impairment on a quarterly basis. We regularly evaluate the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan by loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash 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 property’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 properties. In addition, we consider the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. Such loan loss analysis is completed and reviewed by asset

management and finance personnel who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property 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. An allowance for loan loss is established when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan.

We evaluate modifications to our loan portfolio to determine if the modifications constitute a troubled debt restructuring ("TDR") and/or substantial modification, under ASC Topic 310, "Receivables." During the second quarter of 2018, we determined that a modification of one commercial mortgage loan, secured by a retail center in Cincinnati, OH, with a principal balance of $171.2 million constituted a TDR as the interest rate spread was reduced from 5.5% over LIBOR to 3.0% over LIBOR. The entity in which we own an interest and which owns the underlying property was deemed to be a variable interest entity ("VIE") and it was determined that we are not the primary beneficiary of that VIE. During the fourth quarter of 2018, we recorded a $15.0 million loan loss provision against this loan. After the loan loss provision, the amortized cost of the loan was $158.1 million and $156.1 million as of June 30, 2019 and December 31, 2018, respectively. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using the direct capitalization method. The significant unobservable input used in determining the collateral value was the capitalization rate which was 6.8%. The loan is on accrual status and we continue to receive contractual interest due. As of June 30, 2019 and December 31, 2018, this loan was assigned a risk rating of 5.

We recorded a $10.0 million loan loss provision and impairment against a commercial mortgage loan secured by a fully-built, for-sale residential condominium units located in Bethesda, MD. This was comprised of (i) $5.0 million loan loss recorded during the second quarter of 2018, and (ii) $2.0 million loan loss provision and $3.0 million of impairment recorded during the second quarter of 2017. The impairment was recorded on an investment previously recorded under other assets on our condensed consolidated balance sheet. After the loan loss provisions and related impairment, the amortized cost balance of the loan was $21.5 million and $27.2 million as of June 30, 2019 and December 31, 2018, respectively. The loan loss provision and impairment were based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision and related impairment). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were sales price per square foot and discount rate which were an average of $662 per square foot across properties and 15%, respectively. Effective April 1, 2017, we ceased accruing all interest associated with the loan and account for the loan on a cost-recovery basis (all proceeds are applied towards the loan balance). As of June 30, 2019 and December 31, 2018, this loan was assigned a risk rating of 5.

During 2016, we recorded a loan loss provision of $10.0 million on a commercial mortgage loan and $5.0 million on a contiguous subordinate loan secured by a multifamily property located in Williston, ND. The loan loss provision was based on the difference between fair value of the underlying collateral, and the carrying value of the loan (prior to the loan loss provision). Fair value of the collateral was determined using a discounted cash flow analysis. The significant unobservable inputs used in determining the collateral value were terminal capitalization rate and discount rate which were 11% and 10%, respectively. We ceased accruing interest associated with the loan and only recognized interest income upon receipt of cash. As of December 31, 2018, the amortized cost of the loan, net of the loan loss provision, was $32.4 million and was assigned a risk rating of 5. During the second quarter of 2019, the underlying collateral was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

During the year ended December 31, 2018, we sold a $75.0 million ($17.7 million funded) subordinate position of our $265.0 million loans for the construction of an office campus in Renton, Washington. As of June 30, 2019, our exposure to the property is limited to a $190.0 million ($108.0 million funded) mortgage loan. This transaction was evaluated under ASC 860 - Transfers and Servicing and we determined that it qualifies as a sale and accounted for as such.

As of June 30, 2019 and December 31, 2018, the aggregate loan loss provision was $22.0 million and $37.0 million for commercial mortgage loans and subordinate loans, respectively.

We recognized payment-in-kind ("PIK") interest of $14.6 million and $29.1 million for the three and six months ended June 30, 2019, respectively, and $9.1 million and $19.7 million for the three and six months ended June 30, 2018, respectively.

We recognized $0 and $3.7 million pre-payment penalties and accelerated fees for the three and six months ended June 30, 2019, respectively and $1.6 million for each of the three and six months ended June 30, 2018.Loan Proceeds Held by Servicer

Loan proceeds held by servicer represents principal payments held by our third-party loan servicer as of the balance sheet date which were remitted to us subsequent to the balance sheet date. Loan proceeds held by servicer were $4.6 million and $1.0

million as of June 30, 2019 and December 31, 2018, respectively.

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Other Assets

6 Months Ended

Jun. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

Other Assets

The following table details the components of our other assets at the dates indicated ($ in thousands):

	June 30, 2019		December 31, 2018
Interest receivable	$	39,047	$	33,399
Other	1,025		321
Total	$	40,072	$	33,720

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Secured Debt Arrangements, Net

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Secured Debt Arrangements, Net

Secured Debt Arrangements, Net

At June 30, 2019 and December 31, 2018, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):

	June 30, 2019 (2)						December 31, 2018 (2)
	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)
JPMorgan Facility (USD)	$	951,723	$	712,335		June 2024	$	1,333,503	$	680,141		June 2021
JPMorgan Facility (GBP)	48,277		48,277			June 2024	48,497		48,497			June 2021
DB Repurchase Facility (USD)	862,588		434,090			March 2021	904,181		419,823			March 2021
DB Repurchase Facility (GBP)	137,412		137,412			March 2021	150,819		150,819			March 2021
Goldman Facility	500,000		112,713			November 2021	300,000		210,072			November 2020
CS Facility (USD)	174,278		174,278			December 2019	187,117		187,117			June 2019
CS Facility (GBP)	144,364		144,364			December 2019	151,773		151,773			June 2019
HSBC Facility (GBP)	37,834		37,834			December 2019	48,835		48,835			December 2019
Sub-total	2,856,476		1,801,303				3,124,725		1,897,077
less: deferred financing costs	N/A		(18,246		)		N/A		(17,555		)
Total / Weighted-Average	$	2,856,476	$	1,783,057			$	3,124,725	$	1,879,522

———————

(1) Maturity date assumes extensions at our option are exercised.

(2) Weighted-average rates as of June 30, 2019 and December 31, 2018 were USD L + 2.10% / GBP L + 2.30% and USD L + 2.17% / GBP L + 2.28%, respectively.

JPMorgan Facility

In May 2017, through two indirect wholly-owned subsidiaries, we entered into a Fifth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). During the second quarter of 2019, we amended the JPMorgan Facility to allow for $1.0 billion of maximum borrowings and maturity in June 2022, plus two one-year extensions available at our option, subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars, British pounds ("GBP"), or Euros ("EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under the JPMorgan Facility.

As of June 30, 2019, we had $760.6 million (including £38.0 million assuming conversion into U.S. dollars) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.

DB Repurchase Facility

In April 2018, through an indirect wholly-owned subsidiary, we entered into a Second Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London Branch (as amended, the "DB Repurchase Facility"), which was upsized in September 2018, and provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in

the United States, United Kingdom and the European Union, and enables us to elect to receive advances in U.S. dollars, British pounds, or Euros. The repurchase facility matures in March 2020, plus a one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $571.5 million (including £108.2 million assuming conversion into U.S. dollars) of borrowings outstanding under the DB Repurchase Facility secured by certain of our commercial mortgage loans.

Goldman Facility

In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which was upsized in March 2019 from $300.0 million to $500.0 million and matures in November 2019, plus two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of the seller under the Goldman Facility.

As of June 30, 2019, we had $112.7 million of borrowings outstanding under the Goldman Facility.

CS Facility - USD

In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $174.3 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.

CS Facility - GBP

In June 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - GBP"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $144.4 million (£113.7 million assuming conversion into U.S. dollars) of borrowings outstanding under the CS Facility - GBP secured by one of our commercial mortgage loans.

HSBC Facility

In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility"), which provides for a single asset financing. The facility matures in December 2019. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $37.8 million (£29.8 million assuming conversion into U.S. dollars) of borrowings outstanding under the HSBC Facility secured by one of our commercial mortgage loans.

At June 30, 2019, our borrowings had the following remaining maturities ($ in thousands):

	Less than 1 year (1)		1 to 3 years (1)		3 to 5 years (1)		More than 5 years		Total
JPMorgan Facility	$	144,554	$	294,839	$	321,219	$	—	$	760,612
DB Repurchase Facility	106,304		465,198		—		—		571,502
Goldman Facility	—		112,713		—		—		112,713
CS Facility - USD	174,278		—		—		—		174,278
CS Facility - GBP	144,364		—		—		—		144,364
HSBC Facility	37,834		—		—		—		37,834
Total	$	607,334	$	872,750	$	321,219	$	—	$	1,801,303

———————

(1) Assumes underlying assets are financed through the fully extended maturity date of the facility.

The table below summarizes the outstanding balances at June 30, 2019, as well as the maximum and average month-end balances for the six months ended June 30, 2019 for our borrowings under secured debt arrangements ($ in thousands).

	As of June 30, 2019				For the six months ended June 30, 2019
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	$	760,612	$	1,612,150	$	929,496	$	836,744
DB Repurchase Facility	571,502		1,012,396		672,477		583,879
Goldman Facility	112,713		515,064		312,507		207,934
CS Facility - USD	174,278		238,441		188,037		184,049
CS Facility - GBP	144,364		206,422		150,811		145,599
HSBC Facility	37,834		53,946		50,784		47,830
Total	$	1,801,303	$	3,638,419

We were in compliance with the covenants under each of our secured debt arrangements at June 30, 2019 and December 31, 2018.

Senior Secured Term Loan, Net

In May 2019, we entered into a $500.0 million senior secured term loan (“Term Loan B”). The Term Loan B bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The Term Loan B matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.

Covenants

The Term Loan B includes, the following financial covenants: (i) our ratio of total non-recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.

We were in compliance with the covenants under the Term Loan B at June 30, 2019.

Interest Rate Swap

In connection with the Term Loan B, we entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the Term Loan B at 4.87%.

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Senior Secured Term Loan, Net

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Senior Secured Term Loan, Net

Secured Debt Arrangements, Net

At June 30, 2019 and December 31, 2018, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):

	June 30, 2019 (2)						December 31, 2018 (2)
	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)
JPMorgan Facility (USD)	$	951,723	$	712,335		June 2024	$	1,333,503	$	680,141		June 2021
JPMorgan Facility (GBP)	48,277		48,277			June 2024	48,497		48,497			June 2021
DB Repurchase Facility (USD)	862,588		434,090			March 2021	904,181		419,823			March 2021
DB Repurchase Facility (GBP)	137,412		137,412			March 2021	150,819		150,819			March 2021
Goldman Facility	500,000		112,713			November 2021	300,000		210,072			November 2020
CS Facility (USD)	174,278		174,278			December 2019	187,117		187,117			June 2019
CS Facility (GBP)	144,364		144,364			December 2019	151,773		151,773			June 2019
HSBC Facility (GBP)	37,834		37,834			December 2019	48,835		48,835			December 2019
Sub-total	2,856,476		1,801,303				3,124,725		1,897,077
less: deferred financing costs	N/A		(18,246		)		N/A		(17,555		)
Total / Weighted-Average	$	2,856,476	$	1,783,057			$	3,124,725	$	1,879,522

———————

(1) Maturity date assumes extensions at our option are exercised.

(2) Weighted-average rates as of June 30, 2019 and December 31, 2018 were USD L + 2.10% / GBP L + 2.30% and USD L + 2.17% / GBP L + 2.28%, respectively.

JPMorgan Facility

In May 2017, through two indirect wholly-owned subsidiaries, we entered into a Fifth Amended and Restated Master Repurchase Agreement with JPMorgan Chase Bank, National Association (as amended, the "JPMorgan Facility"). During the second quarter of 2019, we amended the JPMorgan Facility to allow for $1.0 billion of maximum borrowings and maturity in June 2022, plus two one-year extensions available at our option, subject to certain conditions. The JPMorgan Facility enables us to elect to receive advances in U.S. dollars, British pounds ("GBP"), or Euros ("EUR"). Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under the JPMorgan Facility.

As of June 30, 2019, we had $760.6 million (including £38.0 million assuming conversion into U.S. dollars) of borrowings outstanding under the JPMorgan Facility secured by certain of our commercial mortgage loans.

DB Repurchase Facility

In April 2018, through an indirect wholly-owned subsidiary, we entered into a Second Amended and Restated Master Repurchase Agreement with Deutsche Bank AG, Cayman Islands Branch and Deutsche Bank AG, London Branch (as amended, the "DB Repurchase Facility"), which was upsized in September 2018, and provides for advances of up to $1.0 billion for the sale and repurchase of eligible first mortgage loans secured by commercial or multifamily properties located in

the United States, United Kingdom and the European Union, and enables us to elect to receive advances in U.S. dollars, British pounds, or Euros. The repurchase facility matures in March 2020, plus a one-year extension available at our option, subject to certain conditions. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $571.5 million (including £108.2 million assuming conversion into U.S. dollars) of borrowings outstanding under the DB Repurchase Facility secured by certain of our commercial mortgage loans.

Goldman Facility

In November 2017, through an indirect wholly-owned subsidiary, we entered into a master repurchase and securities contract agreement with Goldman Sachs Bank USA (the "Goldman Facility"), which was upsized in March 2019 from $300.0 million to $500.0 million and matures in November 2019, plus two one-year extensions available at our option, subject to certain conditions. Margin calls may occur any time at specified margin deficit thresholds. We have agreed to provide a limited guarantee of the obligations of the seller under the Goldman Facility.

As of June 30, 2019, we had $112.7 million of borrowings outstanding under the Goldman Facility.

CS Facility - USD

In July 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - USD"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - USD matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $174.3 million of borrowings outstanding under the CS Facility - USD secured by certain of our commercial mortgage loans.

CS Facility - GBP

In June 2018, through an indirect wholly-owned subsidiary, we entered into a Master Repurchase Agreement with Credit Suisse AG, acting through its Cayman Islands Branch and Alpine Securitization Ltd (the "CS Facility - GBP"), which provides for advances for the sale and repurchase of eligible commercial mortgage loans secured by real estate. The CS Facility - GBP matures six months after either party notifies the other party of intention to terminate. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $144.4 million (£113.7 million assuming conversion into U.S. dollars) of borrowings outstanding under the CS Facility - GBP secured by one of our commercial mortgage loans.

HSBC Facility

In September 2018, through an indirect wholly-owned subsidiary, we entered into a secured debt arrangement with HSBC Bank plc (the "HSBC Facility"), which provides for a single asset financing. The facility matures in December 2019. Margin calls may occur any time at specified aggregate margin deficit thresholds. We have agreed to provide a guarantee of the obligations of our indirect wholly-owned subsidiaries under this facility.

As of June 30, 2019, we had $37.8 million (£29.8 million assuming conversion into U.S. dollars) of borrowings outstanding under the HSBC Facility secured by one of our commercial mortgage loans.

At June 30, 2019, our borrowings had the following remaining maturities ($ in thousands):

	Less than 1 year (1)		1 to 3 years (1)		3 to 5 years (1)		More than 5 years		Total
JPMorgan Facility	$	144,554	$	294,839	$	321,219	$	—	$	760,612
DB Repurchase Facility	106,304		465,198		—		—		571,502
Goldman Facility	—		112,713		—		—		112,713
CS Facility - USD	174,278		—		—		—		174,278
CS Facility - GBP	144,364		—		—		—		144,364
HSBC Facility	37,834		—		—		—		37,834
Total	$	607,334	$	872,750	$	321,219	$	—	$	1,801,303

———————

(1) Assumes underlying assets are financed through the fully extended maturity date of the facility.

The table below summarizes the outstanding balances at June 30, 2019, as well as the maximum and average month-end balances for the six months ended June 30, 2019 for our borrowings under secured debt arrangements ($ in thousands).

	As of June 30, 2019				For the six months ended June 30, 2019
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	$	760,612	$	1,612,150	$	929,496	$	836,744
DB Repurchase Facility	571,502		1,012,396		672,477		583,879
Goldman Facility	112,713		515,064		312,507		207,934
CS Facility - USD	174,278		238,441		188,037		184,049
CS Facility - GBP	144,364		206,422		150,811		145,599
HSBC Facility	37,834		53,946		50,784		47,830
Total	$	1,801,303	$	3,638,419

We were in compliance with the covenants under each of our secured debt arrangements at June 30, 2019 and December 31, 2018.

Senior Secured Term Loan, Net

In May 2019, we entered into a $500.0 million senior secured term loan (“Term Loan B”). The Term Loan B bears interest at LIBOR plus 2.75% and was issued at a price of 99.5%. The Term Loan B matures in May 2026 and contains restrictions relating to liens, asset sales, indebtedness, and investments in non-wholly owned entities.

Covenants

The Term Loan B includes, the following financial covenants: (i) our ratio of total non-recourse debt to tangible net worth cannot be greater than 3:1; and (ii) our ratio of total unencumbered assets to total pari-passu indebtedness must be at least 1.25:1.

We were in compliance with the covenants under the Term Loan B at June 30, 2019.

Interest Rate Swap

In connection with the Term Loan B, we entered into an interest rate swap to fix LIBOR at 2.12% effectively fixing our all-in coupon on the Term Loan B at 4.87%.

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Convertible Senior Notes, Net

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Convertible Senior Notes, Net

Convertible Senior Notes, Net

In two separate offerings during 2014, we issued an aggregate principal amount of $254.8 million of 5.50% Convertible Senior Notes due 2019 (the "2019 Notes"), for which we received $248.6 million, after deducting the underwriting discount and offering expenses. The 2019 Notes were exchanged or converted for shares of our common stock and cash as follows:

(i) On August 2, 2018, we entered into privately negotiated exchange agreements with a limited number of holders of the 2019 Notes pursuant to which we exchanged $206.2 million of the 2019 Notes for an aggregate of (a) 10,020,328 newly issued shares of our common stock, and (b) $39.3 million in cash. We recorded $166.0 million of additional

paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions,

(ii) Certain holders elected to convert $47.9 million of the 2019 Notes, which were settled for an aggregate of (a) 2,775,509 newly issued shares of our common stock, and (b) $0.2 million in cash. We recorded $13.9 million of additional paid-in-capital in the condensed consolidated statement of changes in stockholders' equity in connection with these transactions. These conversions occurred from August 2018 through maturity.

The remaining $0.7 million in principal amount of the 2019 Notes were repaid at maturity on March 15, 2019.

During the year ended December 31, 2018, we recorded a loss on early extinguishment of debt of $2.6 million, in connection with the exchanges and conversions of the 2019 Notes. This includes fees and accelerated amortization of capitalized costs. There was no such loss related to the 2019 Notes during the three and six months ended June 30, 2019.

In two separate offerings during 2017, we issued an aggregate principal amount of $345.0 million of 4.75% Convertible Senior Notes due 2022 (the "2022 Notes"), for which we received $337.5 million, after deducting the underwriting discount and offering expenses. At June 30, 2019, the 2022 Notes had a carrying value of $336.5 million and an unamortized discount of $8.5 million.

During the fourth quarter of 2018, we issued $230.0 million of 5.375% Convertible Senior Notes due 2023 ("2023 Notes," and together with the 2019 Notes and 2022 Notes, the "Notes"), for which we received $223.7 million after deducting the underwriting discount and offering expenses. At June 30, 2019, the 2023 Notes had a carrying value of $223.1 million and an unamortized discount of $6.9 million.

The following table summarizes the terms of the Notes ($ in thousands):

	Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization
2022 Notes	$	345,000	4.75	%	5.60	%	50.2260	8/23/2022	3.15
2023 Notes	230,000		5.38	%	6.16	%	48.7187	10/15/2023	4.29
Total	$	575,000

———————

(1) Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.

(2) We have the option to settle any conversions in cash, shares of common stock or a combination thereof.  The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

In accordance with ASC 470 - Debt, the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) is to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. GAAP requires that the initial proceeds from the sale of the Notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by us at such time. We measured the fair value of the debt components of the Notes as of their issuance date based on effective interest rates.  As a result, we attributed approximately $15.4 million of the proceeds to the equity component of the Notes ($11.0 million to the 2022 Notes and $4.4 million to the 2023 Notes), which represents the excess proceeds received over the fair value of the liability component of the Notes at the date of issuance. The equity component of the Notes has been reflected within additional paid-in capital in the condensed consolidated balance sheet as of June 30, 2019. The resulting debt discount is being amortized over the period during which the Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the Notes will increase in subsequent reporting periods through the maturity date as the Notes accrete to their par value over the same period.

The aggregate contractual interest expense was approximately $7.2 million and $14.8 million for the three and six months ended June 30, 2019, respectively, as compared to approximately $7.6 million and $15.2 million for the three and six months ended June 30, 2018, respectively. With respect to the amortization of the discount on the liability component of the Notes as well as the amortization of deferred financing costs, we reported additional non-cash interest expense of approximately $1.4 million and $3.1 million for the three and six months ended June 30, 2019, respectively, as compared to $1.8 million and $3.7 million for the three and six months ended June 30, 2018, respectively.

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Derivatives

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than U.S. dollars.

We have entered into a series of forward contracts to sell an amount of foreign currency (British pound and Euro) for an agreed upon amount of U.S. dollars at various dates through February 2023. These forward contracts were executed to economically fix the U.S. dollar amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.

In connection with the Term Loan B, we entered into an interest rate swap to fix LIBOR at 2.12% or an all-in interest rate of 4.87%. We use interest rate swaps and caps to manage exposure to variable cash flows on portions of our borrowings under term loan debt. Interest rate swap and cap agreements allow us to receive a variable rate cash flow based on LIBOR and pay a fixed rate cash flow, mitigating the impact of this exposure. Gains or losses related to the interest rate swap are recorded net under interest expense in our condensed consolidated statement of operations.

The following table summarizes our non-designated foreign exchange ("Fx") forwards and our interest rate swap as of June 30, 2019:

	June 30, 2019
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	95	271,961	GBP	July 2019- December 2021	0.89
Fx Contracts - EUR	15	183,689	EUR	August 2019- February 2023	0.87
Interest Rate Swap	1	500,000	USD	May 2026	6.87

The following table summarizes our non-designated Fx forwards as of December 31, 2018:

	December 31, 2018
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	43	270,161	GBP	January 2019 - November 2020	0.69

We have not designated any of our derivative instruments as hedges as defined in ASC 815 "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to our derivatives for the three and six months ended June 30, 2019 and 2018 ($ in thousands):

		Amount of gain (loss) recognized in income					Amount of gain (loss) recognized in income
		Three months ended June 30,					Six months ended June 30,
	Location of Gain (Loss) Recognized in Income	2019		2018			2019			2018
Forward currency contracts	Gain (loss) on derivative instruments - unrealized	$	10,787	$	24,800		$	(4,198	)	$	15,941
Forward currency contracts	Gain on derivative instruments - realized	399		8,742			8,664			6,565
Interest rate caps(1)	Loss on derivative instruments - unrealized	—		(4		)	—			—
	Gain on derivative instruments	11,186		33,538			4,466			22,506

———————

(1) With a notional amount of $0.0 million and $37.5 million at June 30, 2019, and 2018, respectively.

		Amount of loss recognized in income			Amount of loss recognized in income
		Three months ended June 30,			Six months ended June 30,
	Location of Loss Recognized in Income	2019		2018	2019		2018
Interest rate swap(1)	Unrealized loss on interest rate swap	(13,113	)	—	(13,113	)	—

———————

(1) With a notional amount of $500.0 million and $0.0 million at June 30, 2019, and 2018, respectively.

The following table summarizes the gross asset and liability amounts related to our derivatives at June 30, 2019 and December 31, 2018 ($ in thousands).

 

	June 30, 2019									December 31, 2018
	Gross Amount of Recognized Assets (Liabilities)			Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet			Gross Amount of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheet
Forward currency contracts	$	19,760		$	(258	)	$	19,502		$	23,753	$	(53	)	$	23,700
Interest rate swap	(13,113		)	—			(13,113		)	—		—			—

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Accounts Payable, Accrued Expenses and Other Liabilities

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Accounts Payable, Accrued Expenses and Other Liabilities

Accounts Payable, Accrued Expenses and Other Liabilities

The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):

	June 30, 2019		December 31, 2018
Accrued dividends payable	$	74,295	$	69,033
Collateral deposited under derivative agreements	1,820		20,000
Accrued interest payable	13,470		14,208
Accounts payable and other liabilities	7,151		1,505
Total	$	96,736	$	104,746

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Related Party Transactions

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Management Agreement

In connection with our initial public offering in September 2009, we entered into a management agreement (the "Management Agreement") with the Manager, which describes the services to be provided by the Manager and its compensation for those services. The Manager is responsible for managing our day-to-day operations, subject to the direction and oversight of our board of directors.

Pursuant to the terms of the Management Agreement, the Manager is paid a base management fee equal to 1.5% per annum of our stockholders’ equity (as defined in the Management Agreement), calculated and payable (in cash) quarterly in arrears.

The current term of the Management Agreement was renewed during the period and expires on September 29, 2019 and is automatically renewed for successive one-year terms on each anniversary thereafter. The Management Agreement may be terminated upon expiration of the one-year extension term only upon the affirmative vote of at least two-thirds of our independent directors, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to ARI or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination based on unfair fees by accepting a mutually acceptable reduction of management fees agreed to by at least two-thirds of our independent directors. The Manager must be provided with written notice of any such termination at least 180 days prior to the expiration of the then existing term and will be paid a termination fee equal to three times the sum of the average annual base management fee during the 24-month period immediately preceding the date of termination, calculated as

of the end of the most recently completed fiscal quarter prior to the date of termination. Following a meeting by our independent directors in February 2019, which included a discussion of the Manager’s performance and the level of the management fees thereunder, we determined not to seek termination of the Management Agreement.

We incurred approximately $10.3 million and $19.9 million in base management fees under the Management Agreement for the three and six months ended June 30, 2019, respectively, as compared to approximately $9.0 million and $17.1 million for the three and six months ended June 30, 2018, respectively.

In addition to the base management fee, we are also responsible for reimbursing the Manager for certain expenses paid by the Manager on our behalf or for certain services provided by the Manager to us.

For the three and six months ended June 30, 2019, we paid expenses totaling $0.7 million and $1.4 million, respectively, related to reimbursements for certain expenses paid by the Manager on our behalf under the Management Agreement as compared to $0.6 million and $1.2 million for the same periods in the prior year. These expenses are included in the general and administrative expenses line item of the condensed consolidated statement of operations.

Included in payable to related party on the condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 are approximately $10.3 million and $9.8 million, respectively, for base management fees incurred but not yet paid under the Management Agreement.

Loans receivable

In June 2017, we increased our outstanding loan commitment through the acquisition of an additional $25.0 million of interests in an existing subordinate loan from a fund managed by an affiliate of the Manager, increasing our total outstanding loan commitment to $100.0 million. Furthermore, in September 2017 we funded an additional $25.0 million to acquire a portion of the same pre-development subordinate loan from a fund managed by an affiliate of the Manager, increasing our total outstanding loan commitment to $125.0 million. In May 2018, we increased our outstanding principal balance through the acquisition of an additional $28.2 million interest in the same subordinate loan from a fund managed by an affiliate of the Manager. The pre-development subordinate loan is for the construction of a residential condominium building in New York, New York and is part of a $300.0 million subordinate loan.

In June 2018, we increased our outstanding loan commitment through the acquisition of £4.8 million ($6.4 million assuming conversion into U.S. dollars) pari-passu interest in an existing subordinate loan from a fund managed by an affiliate of the Manager. The subordinate loan is secured by a healthcare portfolio located in the United Kingdom.

Term Loan Debt

In May 2019, Apollo Global Funding, LLC, an affiliate of the Manager, served as one of the five arrangers for the issuance of our Term Loan B and received $0.6 million of arrangement fees.

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Share-Based Payments

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Payments

Share-Based Payments

On September 23, 2009, our board of directors approved the Apollo Commercial Real Estate Finance, Inc. 2009 Equity Incentive Plan ("2009 LTIP") and on April 16, 2019, our board of directors approved the Amended and Restated Apollo Commercial Real Estate Finance, Inc. 2019 Equity Incentive Plan ("2019 LTIP," and together with the 2009 LTIP, the "LTIPs"), which amended and restated the 2009 LTIP. Following the approval of the 2019 LTIP by our stockholders at our 2019 annual meeting of stockholders on June 12, 2019, no additional awards will be granted under the 2009 LTIP and all outstanding awards granted under the 2009 LTIP remain in effect in accordance with the terms in the 2009 LTIP.

The 2019 LTIP provides for grants of restricted common stock, restricted stock units ("RSUs") and other equity-based awards up to an aggregate of 7,000,000 shares of our common stock. The LTIPs are administered by the compensation committee of our board of directors (the "Compensation Committee") and all grants under the LTIPs must be approved by the Compensation Committee.

We recognized stock-based compensation expense of $4.3 million and $8.2 million for the three and six months ended June 30, 2019, respectively, related to restricted stock and RSU vesting, as compared to $4.0 million and $7.4 million for the three and six months ended June 30, 2018. We adopted ASU 2018-07 on January 1, 2019 and the stock-based compensation expense for grants before the adoption of ASU 2018-07 is based on the closing price of our common stock of $16.66 on December 31, 2018, which was the last business day before we adopted ASU 2018-07. Refer to "Note 2 - Summary of Significant Accounting Policies" for further discussion on our adoption of ASU 2018-07.

The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the six months ended June 30, 2019:

	Type	Restricted Stock		RSUs		Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2018		65,697		1,852,957
	Granted	27,245		—		500
	Vested	(47,586	)	—		N/A
	Forfeiture	—		(6,784	)	N/A
Outstanding at June 30, 2019		45,356		1,846,173

Below is a summary of restricted stock and RSU vesting dates as of June 30, 2019: 

Vesting Year	Restricted Stock	RSU	Total Awards
2019	20,000	885,976	905,976
2020	25,356	625,825	651,181
2021	—	334,372	334,372
Total	45,356	1,846,173	1,891,529

At June 30, 2019, we had unrecognized compensation expense of approximately $0.5 million and $23.3 million, respectively, related to the vesting of restricted stock awards and RSUs noted in the table above.

RSU Deliveries

During the six months ended June 30, 2019 and 2018, we delivered 433,426 and 345,996 shares of common stock for 730,717 and 603,677 vested RSUs, respectively. No RSUs were delivered during the three months ended June 30, 2019 and 2018. We allow RSU participants to settle their tax liabilities with a reduction of their share delivery from the originally granted and vested RSUs. The amount, when agreed to by the participant, results in a cash payment to the Manager related to this tax liability and a corresponding adjustment to additional paid in capital on the condensed consolidated statement of changes in stockholders' equity. The adjustment was $5.0 million and $4.7 million for the six months ended June 30, 2019 and 2018, respectively. The adjustment is a reduction of capital related to our equity incentive plan and is presented net of increases of capital related to our equity incentive plan in the condensed consolidated statement of changes in stockholders' equity.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Our authorized capital stock consists of 450,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of June 30, 2019, 153,531,597 shares of common stock were issued and outstanding, 6,770,393 shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock ("Series B Preferred Stock") were issued and outstanding.

On June 10, 2019, we redeemed all 6,900,000 shares of 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock ("Series C Preferred Stock") outstanding. Holders of the Series C Preferred Stock received the redemption price of $25.00 plus accumulated but unpaid dividends to the redemption date of $0.2223 per share.

Dividends. During 2019, we declared the following dividends:

	Three months ended
Dividend declared per share of:	June 30, 2019	March 31, 2019
Common Stock	$0.46	$0.46
Series B Preferred Stock	0.50	0.50
Series C Preferred Stock	0.2223	0.50

Common Stock Offerings. During the first quarter of 2018, we completed a follow-on public offering of 15,525,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a

price of $17.77 per share. The aggregate net proceeds from the offering were $275.9 million after deducting offering expenses.

During the first quarter of 2019, we issued 1,967,361 shares of our common stock, at a per share conversion price of $17.17, related to conversions of the 2019 Notes, the remainder of which matured on March 15, 2019. We recorded a $33.8 million increase in additional paid in capital in the condensed consolidated statement of changes in stockholders' equity. Refer to "Note 9 - Convertible Senior Notes, Net" for a further discussion on the conversions of the 2019 Notes.

During the second quarter of 2019, we completed a follow-on public offering of 17,250,000 shares of our common stock, including shares issued pursuant to the underwriters' option to purchase additional shares, at a price of $18.27 per share. The aggregate net proceeds from the offering were $314.8 million after deducting offering expenses.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Proceedings. From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. On June 28, 2018, AmBase Corporation, 111 West 57th Street Manager Funding LLC and 111 West 57th Investment LLC commenced an action captioned AmBase Corporation et al v. ACREFI Mortgage Lending, LLC et al (No. 653251/2018) in New York Supreme Court.  The complaint names as defendants (i) ACREFI Mortgage Lending, LLC, a subsidiary of the Company, (ii) the Company, and (iii) certain funds managed by Apollo, who are co-lenders on a mezzanine loan against the development of a residential condominium building in Manhattan, New York. The plaintiffs allege that the defendants tortiously interfered with the contractual equity put right in the plaintiffs’ joint venture agreement with the developers of the project, and that the defendants aided and abetted breaches of fiduciary duty by the developers of the project.  The plaintiffs allege the loss of a $70.0 million investment as part of total damages of $700.0 million, which includes punitive damages. The defendants moved to dismiss the complaint on August 17, 2018, and the motion was fully briefed in October 2018. Oral argument took place on March 12, 2019, and the court’s decision is pending. We believe the claims are without merit and plan to vigorously defend the case. We do not believe this will have a material adverse effect on our condensed consolidated financial statements.

Loan Commitments. As described in "Note 4 - Commercial Mortgage and Subordinate Loans, Net," at June 30, 2019, we had $1.2 billion of unfunded commitments related to our commercial mortgage and subordinate loan portfolios.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on the condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 ($ in thousands):

	June 30, 2019						December 31, 2018
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Cash and cash equivalents	$	116,472		$	116,472		$	109,806		$	109,806
Commercial first mortgage loans, net	4,206,754			4,263,296			3,878,981			3,894,947
Subordinate loans, net	1,236,990			1,246,454			1,048,612			1,047,854
Secured debt arrangements	(1,783,057		)	(1,783,057		)	(1,897,077		)	(1,897,077		)
Senior secured term loan	(490,226		)	(496,875		)	—			—
2019 Notes	—			—			(34,278		)	(35,276		)
2022 Notes	(336,505		)	(344,786		)	(335,291		)	(326,025		)
2023 Notes	(223,114		)	(230,097		)	(222,431		)	(221,964		)

To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, are used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Estimates of fair value for cash and convertible senior notes, net are measured using observable Level I inputs as defined in "Note 3 - Fair Value Disclosure." Estimates of fair value for all other financial instruments in the table above are measured using significant estimates, or unobservable Level III inputs as defined in "Note 3 - Fair Value Disclosure."

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Net Income per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Net Income per Share

Net Income per Share

ASC 260 "Earnings per share" requires the use of the two-class method of computing earnings per share for all periods

presented for each class of common stock and participating security as if all earnings for the period had been distributed. Under the two-class method, during periods of net income, the net income is first reduced for dividends declared on all classes of securities to arrive at undistributed earnings. During periods of net losses, the net loss is reduced for dividends declared on participating securities only if the security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

The remaining earnings are allocated to common stockholders and participating securities to the extent that each security shares in earnings as if all of the earnings for the period had been distributed. Each total is then divided by the applicable number of shares to arrive at basic earnings per share. For the diluted earnings, the denominator includes all outstanding shares of common stock and all potential shares of common stock assumed issued if they are dilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of these potential shares of common stock.

The table below presents the computation of basic and diluted net income per share of common stock for the three and six months ended June 30, 2019 and 2018 ($ in thousands except per share data): 

	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Basic Earnings
Net Income	$	61,424		$	55,346		$	129,182		$	104,779
Less: Preferred dividends	(4,919		)	(6,834		)	(11,754		)	(13,669		)
Net income available to common stockholders	$	56,505		$	48,512		$	117,428		$	91,110
Less: Dividends on participating securities	(849		)	(738		)	(1,700		)	(1,489		)
Basic Earnings	$	55,656		$	47,774		$	115,728		$	89,621
Diluted Earnings
Net Income	$	61,424		$	55,346		$	129,182		$	104,779
Less: Preferred dividends	(4,919		)	(6,834		)	(11,754		)	(13,669		)
Net income available to common stockholders	$	56,505		$	48,512		$	117,428		$	91,110
Add: Interest expense on Notes	8,619			N/A			17,881			N/A
Diluted Earnings	$	65,124		$	48,512		$	135,309		$	91,110
Number of Shares:
Basic weighted-average shares of common stock outstanding	145,567,963			123,019,993			140,117,813			116,651,305
Diluted weighted-average shares of common stock outstanding	174,101,234			124,629,317			169,418,177			118,281,153
Earnings Per Share Attributable to Common Stockholders
Basic	$	0.38		$	0.39		$	0.83		$	0.78
Diluted	$	0.37		$	0.39		$	0.80		$	0.78

Prior to the three months ended September 30, 2018, we asserted our intent and ability to settle the principal amount of the Notes in cash and, as a result, the Notes did not have any impact on our diluted earnings per share. As of September 30, 2018, we no longer asserted our intent to fully settle the principal amount of the Notes in cash upon conversion. Accordingly, the dilutive effect to earnings per share for the current year periods is determined using the "if-converted" method whereby interest expense on the outstanding Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three and six months ended June 30, 2019, 28,533,271 and 29,300,363 weighted-average potentially issuable shares from the Notes were included in the dilutive earnings per share denominator, respectively. Refer to "Note 9 - Convertible Senior Notes, Net" for further discussion.

For the three and six months ended June 30, 2019, 1,846,173 and 1,847,860 weighted-average unvested RSUs, respectively, were excluded from the calculation of diluted net income per share because the effect was anti-dilutive as compared to 1,609,324 and 1,629,848 for the same periods in the prior year.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Investment activity. Subsequent to the quarter ended June 30, 2019, we committed capital of $51.5 million (all of which was funded at closing) to a subordinate lending investment.

In addition, we funded approximately $54.2 million for previously closed loans.

Loan Repayments. Subsequent to the end of the quarter, we received approximately $68.2 million from loan repayments.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries. All intercompany amounts have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our most significant estimates include loan loss reserves and impairment. Actual results could differ from those estimates.

These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows have been included. Our results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year or any other future period.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07 "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting" ("ASU 2018-07"). The intention of ASU 2018-07 is to expand the scope of Topic 718 to include share-based payment transactions in exchange for goods and services from nonemployees. These share-based payments will now be measured at grant-date fair value of the equity instrument issued. Upon adoption, only liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established should be remeasured through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 and is applied retrospectively. We adopted ASU 2018-07 in the first quarter of 2019 and it did not have any impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326)" ("ASU 2016-13"). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.  The guidance will replace the "incurred loss" approach under existing guidance with an "expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The guidance is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. While we are currently evaluating the impact ASU 2016-13 will have on our condensed consolidated financial statements, we expect that the adoption will result in higher provisions for expected loan losses.

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Fair Value Disclosure (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Summary of Levels in Fair Value Hierarchy of Financial Instruments

The following table summarizes the levels in the fair value hierarchy into which our financial instruments were categorized as of June 30, 2019 and December 31, 2018 ($ in thousands): 

	Fair Value as of June 30, 2019										Fair Value as of December 31, 2018
	Level I		Level II			Level III		Total			Level I		Level II		Level III		Total
Foreign currency forward assets, net	$	—	$	19,502		$	—	$	19,502		$	—	$	23,700	$	—	$	23,700
Interest rate swap liability	—		(13,113		)	—		(13,113		)	—		—		—		—

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Commercial Mortgage and Subordinate Loans, Net (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of Loan Portfolio

Our loan portfolio was comprised of the following at June 30, 2019 and December 31, 2018 ($ in thousands):

Loan Type	June 30, 2019		December 31, 2018
Commercial mortgage loans, net	$	4,206,754	$	3,878,981
Subordinate loans, net	1,236,990		1,048,612
Total loans, net	$	5,443,744	$	4,927,593

Activity Related to Loan Investment Portfolio

Activity relating to our loan investment portfolio, for the six months ended June 30, 2019, was as follows ($ in thousands):

	Principal Balance		Deferred Fees/Other Items (1)			Provision for Loan Loss (2)			Carrying Value
December 31, 2018	$	4,982,514	$	(17,940	)	$	(36,981	)	$	4,927,593
New loan fundings	787,917		—			—			787,917
Add-on loan fundings (3)	188,322		—			—			188,322

Loan repayments	(490,087		)	—			—			(490,087		)
Gain (loss) on foreign currency translation	(2,806		)	(58		)	—			(2,864		)
Provision for loan loss / (Realized loss on Investment) (2)	(12,513		)	—			15,000			2,487
Deferred fees	—			(12,275		)	—			(12,275		)
PIK interest and amortization of fees	29,201			13,450			—			42,651
June 30, 2019	$	5,482,548		$	(16,823	)	$	(21,981	)	$	5,443,744

———————

(1) Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.

(2) In addition to the $22.0 million provision for loan loss, we recorded an impairment of $3.0 million against an investment previously recorded under other assets on our condensed consolidated balance sheet. During the second quarter of 2019, the underlying collateral on a commercial mortgage loan and a contiguous subordinate loan secured by a multifamily property located in Williston, ND was sold resulting in a realized loss of $12.5 million. Consequently, the previously recorded $15.0 million loan loss provision was reversed.

(3) Represents fundings for loans closed prior to 2019.

Schedule of Overall Statistics for the Loan Portfolio

The following table details overall statistics for our loan portfolio at the dates indicated ($ in thousands):

	June 30, 2019			December 31, 2018
Number of loans	71			69
Principal balance	$	5,482,548		$	4,982,514
Carrying value	$	5,443,744		$	4,927,593
Unfunded loan commitments (1)	$	1,192,118		$	1,095,598
Weighted-average cash coupon (2)	8.2		%	8.4		%
Weighted-average remaining term (3)	2.9 years			2.8 years

  ———————

(1) Unfunded loan commitments are primarily funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments are funded over the term of each loan, subject in certain cases to an expiration date.

(2) For floating rate loans, based on applicable benchmark rates as of the specified dates.

(3) Assumes all extension options are exercised.

Schedule of Mortgage Loans on Real Estate

The table below details the property type of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

	June 30, 2019				December 31, 2018
Property Type	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Hotel	$	1,322,167	24.3	%	$	1,286,590	26.1	%
Residential-for-sale: construction	706,260		12.9	%	528,510		10.7	%
Residential-for-sale: inventory	395,375		7.3	%	577,053		11.7	%
Office	1,202,311		22.2	%	832,620		16.9	%
Urban Predevelopment	595,263		10.8	%	683,886		13.9	%
Multifamily	472,785		8.7	%	448,899		9.1	%
Industrial	227,451		4.2	%	32,000		0.6	%
Retail Center	158,128		2.9	%	156,067		3.2	%
Healthcare	142,933		2.6	%	156,814		3.2	%
Other	120,041		2.2	%	151,197		3.1	%
Mixed Use	101,030		1.9	%	73,957		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

The table below details the geographic distribution of the properties securing the loans in our portfolio at the dates indicated ($ in thousands):

	June 30, 2019				December 31, 2018
Geographic Location	Carrying Value		% of Portfolio		Carrying Value		% of Portfolio
Manhattan, NY	$	1,883,438	34.6	%	$	1,669,145	33.9	%
Brooklyn, NY	553,859		10.2	%	346,056		7.0	%
Northeast	18,738		0.3	%	23,479		0.5	%
West	696,804		12.8	%	614,160		12.5	%
Midwest	638,981		11.8	%	631,710		12.8	%
Southeast	501,878		9.2	%	559,043		11.3	%
Southwest	119,910		2.2	%	96,345		2.0	%
Mid Atlantic	108,056		2.0	%	211,775		4.3	%
United Kingdom	654,952		12.0	%	700,460		14.2	%
Other International	267,128		4.9	%	75,420		1.5	%
Total	$	5,443,744	100.0	%	$	4,927,593	100.0	%

Carrying Value of Loan Portfolio Based on Internal Risk Ratings

The following table allocates the carrying value of our loan portfolio based on our internal risk ratings at the dates indicated ($ in thousands):

	June 30, 2019					December 31, 2018
Risk Rating	Number of Loans	Carrying Value		% of Loan Portfolio		Number of Loans	Carrying Value		% of Loan Portfolio
1	—	$	—	—	%	—	$	—	—	%
2	3	253,817		5	%	3	138,040		3	%
3	66	5,010,351		92	%	63	4,573,930		93	%
4	—	—		—	%	—	—		—	%
5	2	179,576		3	%	3	215,623		4	%
	71	$	5,443,744	100	%	69	$	4,927,593	100	%
Weighted-average risk rating				3.0					3.1

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Other Assets (Tables)

6 Months Ended

Jun. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Components of Other Assets

The following table details the components of our other assets at the dates indicated ($ in thousands):

	June 30, 2019		December 31, 2018
Interest receivable	$	39,047	$	33,399
Other	1,025		321
Total	$	40,072	$	33,720

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Secured Debt Arrangements, Net (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Weighted Average Maturities and Interest Rates of Borrowings

At June 30, 2019 and December 31, 2018, our borrowings had the following secured debt arrangements, maturities and weighted-average interest rates ($ in thousands):

	June 30, 2019 (2)						December 31, 2018 (2)
	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)	Maximum Amount of Borrowings		Borrowings Outstanding			Maturity (1)
JPMorgan Facility (USD)	$	951,723	$	712,335		June 2024	$	1,333,503	$	680,141		June 2021
JPMorgan Facility (GBP)	48,277		48,277			June 2024	48,497		48,497			June 2021
DB Repurchase Facility (USD)	862,588		434,090			March 2021	904,181		419,823			March 2021
DB Repurchase Facility (GBP)	137,412		137,412			March 2021	150,819		150,819			March 2021
Goldman Facility	500,000		112,713			November 2021	300,000		210,072			November 2020
CS Facility (USD)	174,278		174,278			December 2019	187,117		187,117			June 2019
CS Facility (GBP)	144,364		144,364			December 2019	151,773		151,773			June 2019
HSBC Facility (GBP)	37,834		37,834			December 2019	48,835		48,835			December 2019
Sub-total	2,856,476		1,801,303				3,124,725		1,897,077
less: deferred financing costs	N/A		(18,246		)		N/A		(17,555		)
Total / Weighted-Average	$	2,856,476	$	1,783,057			$	3,124,725	$	1,879,522

———————

(1) Maturity date assumes extensions at our option are exercised.

(2) Weighted-average rates as of June 30, 2019 and December 31, 2018 were USD L + 2.10% / GBP L + 2.30% and USD L + 2.17% / GBP L + 2.28%, respectively.

Remaining Maturities of Borrowings

At June 30, 2019, our borrowings had the following remaining maturities ($ in thousands):

	Less than 1 year (1)		1 to 3 years (1)		3 to 5 years (1)		More than 5 years		Total
JPMorgan Facility	$	144,554	$	294,839	$	321,219	$	—	$	760,612
DB Repurchase Facility	106,304		465,198		—		—		571,502
Goldman Facility	—		112,713		—		—		112,713
CS Facility - USD	174,278		—		—		—		174,278
CS Facility - GBP	144,364		—		—		—		144,364
HSBC Facility	37,834		—		—		—		37,834
Total	$	607,334	$	872,750	$	321,219	$	—	$	1,801,303

———————

(1) Assumes underlying assets are financed through the fully extended maturity date of the facility.

Schedule of Outstanding, Maximum and Average Balances of Debt

The table below summarizes the outstanding balances at June 30, 2019, as well as the maximum and average month-end balances for the six months ended June 30, 2019 for our borrowings under secured debt arrangements ($ in thousands).

	As of June 30, 2019				For the six months ended June 30, 2019
	Balance		Amortized Cost of Collateral		Maximum Month-End Balance		Average Month-End Balance
JPMorgan Facility	$	760,612	$	1,612,150	$	929,496	$	836,744
DB Repurchase Facility	571,502		1,012,396		672,477		583,879
Goldman Facility	112,713		515,064		312,507		207,934
CS Facility - USD	174,278		238,441		188,037		184,049
CS Facility - GBP	144,364		206,422		150,811		145,599
HSBC Facility	37,834		53,946		50,784		47,830
Total	$	1,801,303	$	3,638,419

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Convertible Senior Notes, Net (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Convertible Senior Notes

The following table summarizes the terms of the Notes ($ in thousands):

	Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization
2022 Notes	$	345,000	4.75	%	5.60	%	50.2260	8/23/2022	3.15
2023 Notes	230,000		5.38	%	6.16	%	48.7187	10/15/2023	4.29
Total	$	575,000

———————

(1) Effective rate includes the effect of the adjustment for the conversion option (See endnote (2) below), the value of which reduced the initial liability and was recorded in additional paid-in-capital.

(2) We have the option to settle any conversions in cash, shares of common stock or a combination thereof.  The conversion rate represents the number of shares of common stock issuable per one thousand principal amount of the Notes converted, and includes adjustments relating to cash dividend payments made by us to stockholders that have been deferred and carried-forward in accordance with, and are not yet required to be made pursuant to, the terms of the applicable supplemental indenture.

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Derivatives (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Non-Designated Foreign Exchange Forwards

The following table summarizes our non-designated foreign exchange ("Fx") forwards and our interest rate swap as of June 30, 2019:

	June 30, 2019
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	95	271,961	GBP	July 2019- December 2021	0.89
Fx Contracts - EUR	15	183,689	EUR	August 2019- February 2023	0.87
Interest Rate Swap	1	500,000	USD	May 2026	6.87

The following table summarizes our non-designated Fx forwards as of December 31, 2018:

	December 31, 2018
	Number of Contracts	Aggregate Notional Amount (in thousands)	Notional Currency	Maturity	Weighted-Average Years to Maturity
Fx Contracts - GBP	43	270,161	GBP	January 2019 - November 2020	0.69

Summary of Amounts Recognized on Consolidated Statements of Operations Related to Company's Derivatives

The following table summarizes the amounts recognized on the condensed consolidated statements of operations related to our derivatives for the three and six months ended June 30, 2019 and 2018 ($ in thousands):

		Amount of gain (loss) recognized in income					Amount of gain (loss) recognized in income
		Three months ended June 30,					Six months ended June 30,
	Location of Gain (Loss) Recognized in Income	2019		2018			2019			2018
Forward currency contracts	Gain (loss) on derivative instruments - unrealized	$	10,787	$	24,800		$	(4,198	)	$	15,941
Forward currency contracts	Gain on derivative instruments - realized	399		8,742			8,664			6,565
Interest rate caps(1)	Loss on derivative instruments - unrealized	—		(4		)	—			—
	Gain on derivative instruments	11,186		33,538			4,466			22,506

———————

(1) With a notional amount of $0.0 million and $37.5 million at June 30, 2019, and 2018, respectively.

		Amount of loss recognized in income			Amount of loss recognized in income
		Three months ended June 30,			Six months ended June 30,
	Location of Loss Recognized in Income	2019		2018	2019		2018
Interest rate swap(1)	Unrealized loss on interest rate swap	(13,113	)	—	(13,113	)	—

———————

(1)

With a notional amount of $500.0 million and $0.0 million at June 30, 2019, and 2018, respectively.

Summarizes Gross Asset and Liability Amounts Related to Derivatives

The following table summarizes the gross asset and liability amounts related to our derivatives at June 30, 2019 and December 31, 2018 ($ in thousands).

 

	June 30, 2019									December 31, 2018
	Gross Amount of Recognized Assets (Liabilities)			Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet			Gross Amount of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet			Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheet
Forward currency contracts	$	19,760		$	(258	)	$	19,502		$	23,753	$	(53	)	$	23,700
Interest rate swap	(13,113		)	—			(13,113		)	—		—			—

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Accounts Payable, Accrued Expenses and Other Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Schedule of Accounts Payable, Accrued Expense and Other Liabilities

The following table details the components of our accounts payable, accrued expense and other liabilities ($ in thousands):

	June 30, 2019		December 31, 2018
Accrued dividends payable	$	74,295	$	69,033
Collateral deposited under derivative agreements	1,820		20,000
Accrued interest payable	13,470		14,208
Accounts payable and other liabilities	7,151		1,505
Total	$	96,736	$	104,746

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Share-Based Payments (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Summary of Grants, Exchanges and Forfeitures of Restricted Stock and RSUs

The following table summarizes the grants, vesting and forfeitures of restricted common stock and RSUs during the six months ended June 30, 2019:

	Type	Restricted Stock		RSUs		Grant Date Fair Value ($ in thousands)
Outstanding at December 31, 2018		65,697		1,852,957
	Granted	27,245		—		500
	Vested	(47,586	)	—		N/A
	Forfeiture	—		(6,784	)	N/A
Outstanding at June 30, 2019		45,356		1,846,173

Below is a summary of restricted stock and RSU vesting dates as of June 30, 2019: 

Vesting Year	Restricted Stock	RSU	Total Awards
2019	20,000	885,976	905,976
2020	25,356	625,825	651,181
2021	—	334,372	334,372
Total	45,356	1,846,173	1,891,529

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of Dividends Declared

During 2019, we declared the following dividends:

	Three months ended
Dividend declared per share of:	June 30, 2019	March 31, 2019
Common Stock	$0.46	$0.46
Series B Preferred Stock	0.50	0.50
Series C Preferred Stock	0.2223	0.50

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Carrying Value and Estimated Fair Value of Company's Financial Instruments

The following table presents the carrying value and estimated fair value of our financial instruments not carried at fair value on the condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 ($ in thousands):

	June 30, 2019						December 31, 2018
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Cash and cash equivalents	$	116,472		$	116,472		$	109,806		$	109,806
Commercial first mortgage loans, net	4,206,754			4,263,296			3,878,981			3,894,947
Subordinate loans, net	1,236,990			1,246,454			1,048,612			1,047,854
Secured debt arrangements	(1,783,057		)	(1,783,057		)	(1,897,077		)	(1,897,077		)
Senior secured term loan	(490,226		)	(496,875		)	—			—
2019 Notes	—			—			(34,278		)	(35,276		)
2022 Notes	(336,505		)	(344,786		)	(335,291		)	(326,025		)
2023 Notes	(223,114		)	(230,097		)	(222,431		)	(221,964		)

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Net Income per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Basic and Diluted Net Income per Share of Common Stock Using Two-Class Method

The table below presents the computation of basic and diluted net income per share of common stock for the three and six months ended June 30, 2019 and 2018 ($ in thousands except per share data): 

	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Basic Earnings
Net Income	$	61,424		$	55,346		$	129,182		$	104,779
Less: Preferred dividends	(4,919		)	(6,834		)	(11,754		)	(13,669		)
Net income available to common stockholders	$	56,505		$	48,512		$	117,428		$	91,110
Less: Dividends on participating securities	(849		)	(738		)	(1,700		)	(1,489		)
Basic Earnings	$	55,656		$	47,774		$	115,728		$	89,621
Diluted Earnings
Net Income	$	61,424		$	55,346		$	129,182		$	104,779
Less: Preferred dividends	(4,919		)	(6,834		)	(11,754		)	(13,669		)
Net income available to common stockholders	$	56,505		$	48,512		$	117,428		$	91,110
Add: Interest expense on Notes	8,619			N/A			17,881			N/A
Diluted Earnings	$	65,124		$	48,512		$	135,309		$	91,110
Number of Shares:
Basic weighted-average shares of common stock outstanding	145,567,963			123,019,993			140,117,813			116,651,305
Diluted weighted-average shares of common stock outstanding	174,101,234			124,629,317			169,418,177			118,281,153
Earnings Per Share Attributable to Common Stockholders
Basic	$	0.38		$	0.39		$	0.83		$	0.78
Diluted	$	0.37		$	0.39		$	0.80		$	0.78

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Summary of Significant Accounting Policies - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019 Segment
Accounting Policies [Abstract]
Number of business segments	1

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Fair Value Disclosure - Summarizes Levels in Fair Value Hierarchy of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward assets, net	$ 19,502	$ 23,700
Interest rate swap liability	(13,113)	0
Estimate of Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward assets, net	19,502	23,700
Interest rate swap liability	(13,113)	0
Level 1 | Estimate of Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward assets, net	0	0
Interest rate swap liability	0	0
Level 2 | Estimate of Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward assets, net	19,502	23,700
Interest rate swap liability	(13,113)	0
Level 3 | Estimate of Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward assets, net	0	0
Interest rate swap liability	$ 0	$ 0

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Commercial Mortgage and Subordinate Loans, Net - Loan Portfolio (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying value	$ 5,443,744	$ 4,927,593
Commercial Mortgage Portfolio Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying value	4,206,754	3,878,981
Subordinate Mortgage Portfolio Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Carrying value	$ 1,236,990	$ 1,048,612

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Commercial Mortgage and Subordinate Loans, Net - Activity Relating to Loan Investment Portfolio (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Principal Balance
Loan repayments			$ (341,453)	$ (227,913)
Provision for Loan Loss
Reversal of (Provision for) loan losses and impairments	$ 15,000	$ (5,000)	15,000	(5,000)
Carrying Value
Reversal of (Provision for) loan losses and impairments	15,000	$ (5,000)	15,000	$ (5,000)
Commercial Mortgage and Subordinated Portfolio Segment
Principal Balance
Principal balance, beginning			4,982,514
New loan fundings			787,917
Add-on loan fundings			188,322
Loan repayments			(490,087)
Gain (loss) on foreign currency translation			(2,806)
PIK interest and amortization of fees			29,067
Principal balance, ending	5,482,548		5,482,548
Deferred Fees/Other Items
Deferred fees/other items, beginning			(17,940)
Gain (loss) on foreign currency translation			(58)
Deferred fees			(12,275)
PIK interest and amortization of fees			13,450
Deferred fees/other items, ending	(16,823)		(16,823)
Provision for Loan Loss
Provision for loans, beginning			(36,981)
Reversal of (Provision for) loan losses and impairments	15,000		15,000
Provision for loans, ending	(21,981)		(21,981)
Carrying Value
Carrying value, beginning balance			4,927,593
Gain (loss) on foreign currency translation			(2,864)
Provision for loan loss / (Realized loss on Investment)			2,487
Deferred fees			(12,275)
PIK interest and amortization of fees			42,651
Carrying value, ending balance	5,443,744		5,443,744
Loss on sale of underlying collateral	12,500		12,513
Reversal of (Provision for) loan losses and impairments	$ 15,000		15,000
Other Assets | Commercial Mortgage and Subordinated Portfolio Segment
Carrying Value
Impairment			$ 3,000

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Commercial Mortgage and Subordinate Loans, Net - Additional Information (Details) $ in Thousands	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) $ / ft²	Dec. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2019 USD ($) $ / ft²	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2016 USD ($)	Mar. 31, 2018
Financing Receivable, Allowance for Credit Loss [Line Items]
Percentage of loan portfolio					100.00%		100.00%
(Reversal of) Provision for loan losses and impairments	$ (15,000)		$ 5,000		$ (15,000)	$ 5,000
Carrying value	5,443,744	$ 4,927,593			5,443,744		$ 4,927,593
Payment in kind interest	14,600		9,100		29,100	19,700
Proceeds from pre-payment penalties or accelerated fees	0		1,600		3,700	$ 1,600
Commercial Mortgage and Subordinated Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
(Reversal of) Provision for loan losses and impairments	(15,000)				(15,000)
Amortized cost of the loan	5,443,744	4,927,593			5,443,744		4,927,593
Loan loss provision and impairment					22,000		37,000
Loss on sale of underlying collateral	12,500				12,513
Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Carrying value	4,206,754	3,878,981			4,206,754		3,878,981
Subordinate Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Carrying value	1,236,990	1,048,612			1,236,990		1,048,612
Retail Center - Cincinnati, OH | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
(Reversal of) Provision for loan losses and impairments		15,000
Amortized cost of the loan	158,100	156,100			158,100		156,100
Residential Condominium - Bethesda, MD | Commercial Mortgage and Subordinated Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
(Reversal of) Provision for loan losses and impairments			$ 5,000	$ 2,000
Amortized cost of the loan	21,500	27,200			21,500		27,200
Loan loss provision and impairment					10,000
Impairment				$ 3,000
Multifamily - Williston, ND | Commercial Mortgage and Subordinated Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Amortized cost of the loan		32,400					32,400
Multifamily - Williston, ND | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
(Reversal of) Provision for loan losses and impairments								$ 10,000
Multifamily - Williston, ND | Subordinate Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
(Reversal of) Provision for loan losses and impairments								$ 5,000
Office Campus - Renton, WA | Subordinate Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Proceeds from sale of loan							75,000
Proceeds from sale of loan, amount funded							17,700
Carrying value		265,000					$ 265,000
Exposure to mortgage loan	190,000				190,000
Exposure to mortgage loan, amount funded	$ 108,000				$ 108,000
Floating Rate Loan
Financing Receivable, Allowance for Credit Loss [Line Items]
Percentage of loan portfolio					93.00%		91.00%
Net operating income | Retail Center - Cincinnati, OH | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Loan collateral		$ 10,500					$ 10,500
Capitalization rate | Retail Center - Cincinnati, OH | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Loan collateral, measurement input		0.068	0.068			0.068	0.068
Dollars per square foot | Residential Condominium - Bethesda, MD | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Loan collateral, measurement input | $ / ft²	662				662
Discount rate | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Loan collateral, measurement input								0.10
Discount rate | Residential Condominium - Bethesda, MD | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Loan collateral, measurement input	0.15				0.15
Terminal capitalization rate | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Loan collateral, measurement input								0.11
Contractual Interest Rate Reduction | Retail Center - Cincinnati, OH | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Unpaid principal balance of loan restructured			$ 171,200			$ 171,200
Contractual Interest Rate Reduction | London Interbank Offered Rate (LIBOR) | Retail Center - Cincinnati, OH | Commercial Mortgage Portfolio Segment
Financing Receivable, Allowance for Credit Loss [Line Items]
Basis spread on variable rate			3.00%			3.00%			5.50%

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Commercial Mortgage and Subordinate Loans, Net - Statistics for Loan Portfolio (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) loan	Dec. 31, 2018 USD ($) loan
Loans and Leases Receivable Disclosure [Line Items]
Number of loans | loan	71	69
Carrying value	$ 5,443,744	$ 4,927,593
Unfunded loan commitments	$ 1,192,118	$ 1,095,598
Weighted-average cash coupon	8.20%	8.40%
Weighted-average remaining term	2 years 10 months 24 days	2 years 9 months 18 days
Mortgage loans
Loans and Leases Receivable Disclosure [Line Items]
Principal balance	$ 5,482,548	$ 4,982,514

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Commercial Mortgage and Subordinate Loans, Net - Schedule of Mortgage Loans by Property Type and Geographic Distribution (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 5,443,744	$ 4,927,593
% of Portfolio	100.00%	100.00%
Hotel
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 1,322,167	$ 1,286,590
% of Portfolio	24.30%	26.10%
Residential-for-sale: construction
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 706,260	$ 528,510
% of Portfolio	12.90%	10.70%
Residential-for-sale: inventory
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 395,375	$ 577,053
% of Portfolio	7.30%	11.70%
Office
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 1,202,311	$ 832,620
% of Portfolio	22.20%	16.90%
Urban Predevelopment
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 595,263	$ 683,886
% of Portfolio	10.80%	13.90%
Multifamily
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 472,785	$ 448,899
% of Portfolio	8.70%	9.10%
Industrial
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 227,451	$ 32,000
% of Portfolio	4.20%	0.60%
Retail Center
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 158,128	$ 156,067
% of Portfolio	2.90%	3.20%
Healthcare
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 142,933	$ 156,814
% of Portfolio	2.60%	3.20%
Other
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 120,041	$ 151,197
% of Portfolio	2.20%	3.10%
Mixed Use
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 101,030	$ 73,957
% of Portfolio	1.90%	1.50%
Manhattan, NY
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 1,883,438	$ 1,669,145
% of Portfolio	34.60%	33.90%
Brooklyn, NY
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 553,859	$ 346,056
% of Portfolio	10.20%	7.00%
Northeast
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 18,738	$ 23,479
% of Portfolio	0.30%	0.50%
West
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 696,804	$ 614,160
% of Portfolio	12.80%	12.50%
Midwest
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 638,981	$ 631,710
% of Portfolio	11.80%	12.80%
Southeast
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 501,878	$ 559,043
% of Portfolio	9.20%	11.30%
Southwest
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 119,910	$ 96,345
% of Portfolio	2.20%	2.00%
Mid Atlantic
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 108,056	$ 211,775
% of Portfolio	2.00%	4.30%
United Kingdom
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 654,952	$ 700,460
% of Portfolio	12.00%	14.20%
Other International
Loans and Leases Receivable Disclosure [Line Items]
Carrying value	$ 267,128	$ 75,420
% of Portfolio	4.90%	1.50%

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Commercial Mortgage and Subordinate Loans, Net - Allocation of Carrying Value of Loan Portfolio Based on Internal Risk Ratings (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) loan	Dec. 31, 2018 USD ($) loan
Financing Receivable, Credit Quality Indicator [Line Items]
Number of Loans | loan	71	69
Carrying value | $	$ 5,443,744	$ 4,927,593
% of Portfolio	100.00%	100.00%
Weighted-average risk rating	3.0	3.1
1
Financing Receivable, Credit Quality Indicator [Line Items]
Number of Loans | loan	0	0
Carrying value | $	$ 0	$ 0
% of Portfolio	0.00%	0.00%
2
Financing Receivable, Credit Quality Indicator [Line Items]
Number of Loans | loan	3	3
Carrying value | $	$ 253,817	$ 138,040
% of Portfolio	5.00%	3.00%
3
Financing Receivable, Credit Quality Indicator [Line Items]
Number of Loans | loan	66	63
Carrying value | $	$ 5,010,351	$ 4,573,930
% of Portfolio	92.00%	93.00%
4
Financing Receivable, Credit Quality Indicator [Line Items]
Number of Loans | loan	0	0
Carrying value | $	$ 0	$ 0
% of Portfolio	0.00%	0.00%
5
Financing Receivable, Credit Quality Indicator [Line Items]
Number of Loans | loan	2	3
Carrying value | $	$ 179,576	$ 215,623
% of Portfolio	3.00%	4.00%

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Loan Proceeds Held by Servicer (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Receivables [Abstract]
Loan proceeds held by servicer	$ 4,619	$ 1,000

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Other Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Interest receivable	$ 39,047	$ 33,399
Other	1,025	321
Total	$ 40,072	$ 33,720

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Secured Debt Arrangements, Net - Weighted Average Maturities and Interest Rates of Borrowings (Details) £ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jun. 30, 2019 GBP (£)	Sep. 30, 2018 USD ($)	Nov. 30, 2017 USD ($)
Debt Instrument [Line Items]
Borrowings Outstanding	$ 1,783,057,000	$ 1,879,522,000
less: deferred financing costs	(7,333,000)	0
Line of Credit
Debt Instrument [Line Items]
Maximum Amount of Borrowings	2,856,476,000	3,124,725,000
Borrowings Outstanding	1,783,057,000	1,879,522,000
less: deferred financing costs	$ (18,246,000)	$ (17,555,000)
Line of Credit | London Interbank Offered Rate (LIBOR) | Weighted Average
Debt Instrument [Line Items]
Weighted Average Rate	2.10%	2.17%
Line of Credit | GBP London Interbank Offered Rate (LIBOR) | Weighted Average
Debt Instrument [Line Items]
Weighted Average Rate	2.30%	2.28%
Line of Credit | JP Morgan Chase, DB Repurchase Facility, Goldman Sachs, Credit Suisse and HSBC Facilities [Member]
Debt Instrument [Line Items]
Maximum Amount of Borrowings	$ 2,856,476,000	$ 3,124,725,000
Borrowings Outstanding	1,801,303,000	1,897,077,000
Line of Credit | Deutsche Bank Repurchase Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings				$ 1,000,000,000.0
Borrowings Outstanding	571,500,000		£ 108.2
Line of Credit | Goldman Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	500,000,000	300,000,000			$ 300,000,000.0
Borrowings Outstanding	112,713,000	210,072,000
Line of Credit | Credit Suisse Facility
Debt Instrument [Line Items]
Borrowings Outstanding	144,400,000
USD | Line of Credit | JP Morgan Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	951,723,000	1,333,503,000
Borrowings Outstanding	712,335,000	680,141,000
USD | Line of Credit | Deutsche Bank Repurchase Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	862,588,000	904,181,000
Borrowings Outstanding	434,090,000	419,823,000
USD | Line of Credit | Credit Suisse Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	174,278,000	187,117,000
Borrowings Outstanding	174,278,000	187,117,000
GBP | Line of Credit | JP Morgan Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	48,277,000	48,497,000
Borrowings Outstanding	48,277,000	48,497,000
GBP | Line of Credit | Deutsche Bank Repurchase Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	137,412,000	150,819,000
Borrowings Outstanding	137,412,000	150,819,000
GBP | Line of Credit | Credit Suisse Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	144,364,000	151,773,000
Borrowings Outstanding	144,364,000	151,773,000	£ 113.7
GBP | Line of Credit | HSBC Facility
Debt Instrument [Line Items]
Maximum Amount of Borrowings	37,834,000	48,835,000
Borrowings Outstanding	$ 37,834,000	$ 48,835,000

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Secured Debt Arrangements, Net - Additional Information (Details) £ in Thousands	1 Months Ended					3 Months Ended
	Sep. 30, 2018 USD ($)	Jul. 31, 2018	Jun. 30, 2018	Nov. 30, 2017 USD ($) extension	May 31, 2017 subsidiary	Jun. 30, 2019 USD ($) extension	Jun. 30, 2019 GBP (£)	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Borrowings Outstanding						$ 1,783,057,000		$ 1,879,522,000
Line of Credit
Debt Instrument [Line Items]
Maximum borrowing under facility						2,856,476,000		3,124,725,000
Balance						1,801,303,000
Borrowings Outstanding						1,783,057,000		1,879,522,000
Line of Credit | JP Morgan Facility
Debt Instrument [Line Items]
Balance						760,612,000
Line of Credit | DB Repurchase Facility
Debt Instrument [Line Items]
Maximum borrowing under facility	$ 1,000,000,000.0
Extension option	1 year
Balance						571,502,000
Borrowings Outstanding						571,500,000	£ 108,200
Line of Credit | Goldman Sachs Repurchase Facility
Debt Instrument [Line Items]
Maximum borrowing under facility				$ 300,000,000.0		500,000,000		300,000,000
Number of extensions available | extension				2
Extension option				1 year
Balance						112,713,000
Borrowings Outstanding						112,713,000		210,072,000
Line of Credit | Credit Suisse Facility
Debt Instrument [Line Items]
Borrowings Outstanding						144,400,000
Term after either party notifies the other party of intention to terminate			6 months
Line of Credit | HSBC Facility
Debt Instrument [Line Items]
Balance						37,834,000
Line of credit, amount outstanding						37,800,000
JP Morgan Facility | Line of Credit | JP Morgan Facility
Debt Instrument [Line Items]
Number of subsidiaries | subsidiary					2
Amended and Restated JPMorgan Facility | Line of Credit | JP Morgan Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						$ 1,000,000,000.0
Number of extensions available | extension						2
Extension option						1 year
Balance						$ 760,600,000	38,000
USD | Line of Credit | JP Morgan Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						951,723,000		1,333,503,000
Borrowings Outstanding						712,335,000		680,141,000
USD | Line of Credit | DB Repurchase Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						862,588,000		904,181,000
Borrowings Outstanding						434,090,000		419,823,000
USD | Line of Credit | Credit Suisse Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						174,278,000		187,117,000
Balance						174,278,000
Borrowings Outstanding						174,278,000		187,117,000
Term after either party notifies the other party of intention to terminate		6 months
GBP | Line of Credit | JP Morgan Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						48,277,000		48,497,000
Borrowings Outstanding						48,277,000		48,497,000
GBP | Line of Credit | DB Repurchase Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						137,412,000		150,819,000
Borrowings Outstanding						137,412,000		150,819,000
GBP | Line of Credit | Credit Suisse Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						144,364,000		151,773,000
Balance | £							144,364
Borrowings Outstanding						144,364,000	113,700	151,773,000
GBP | Line of Credit | HSBC Facility
Debt Instrument [Line Items]
Maximum borrowing under facility						37,834,000		48,835,000
Borrowings Outstanding						$ 37,834,000		$ 48,835,000
Line of credit, amount outstanding | £							£ 29,800

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Secured Debt Arrangements, Net - Remaining Maturities of Borrowings (Details) - Jun. 30, 2019 - Line of Credit £ in Thousands, $ in Thousands	USD ($)	GBP (£)
Line of Credit Facility [Line Items]
Less than 1 year	$ 607,334
1 to 3 years	872,750
3 to 5 years	321,219
More than 5 years	0
Total	1,801,303
JP Morgan Facility
Line of Credit Facility [Line Items]
Less than 1 year	144,554
1 to 3 years	294,839
3 to 5 years	321,219
More than 5 years	0
Total	760,612
DB Repurchase Facility
Line of Credit Facility [Line Items]
Less than 1 year	106,304
1 to 3 years	465,198
3 to 5 years	0
More than 5 years	0
Total	571,502
Goldman Facility
Line of Credit Facility [Line Items]
Less than 1 year	0
1 to 3 years	112,713
3 to 5 years	0
More than 5 years	0
Total	112,713
HSBC Facility
Line of Credit Facility [Line Items]
Less than 1 year	37,834
1 to 3 years	0
3 to 5 years	0
More than 5 years	0
Total	37,834
USD | CS Facility
Line of Credit Facility [Line Items]
Less than 1 year	174,278
1 to 3 years	0
3 to 5 years	0
More than 5 years	0
Total	$ 174,278
GBP | CS Facility
Line of Credit Facility [Line Items]
Less than 1 year | £		£ 144,364
1 to 3 years | £		0
3 to 5 years | £		0
More than 5 years | £		0
Total | £		£ 144,364

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Secured Debt Arrangements, Net - Summary of Outstanding Balances, Maximum and Average Balances of Borrowings (Details) - 6 months ended Jun. 30, 2019 - Line of Credit £ in Thousands, $ in Thousands	USD ($)	GBP (£)	GBP (£)
Line of Credit Facility [Line Items]
Balance	$ 1,801,303
Amortized Cost of Collateral	3,638,419
JP Morgan Facility
Line of Credit Facility [Line Items]
Balance	760,612
Amortized Cost of Collateral	1,612,150
Maximum Month-End Balance	929,496
Average Month-End Balance	836,744
DB Repurchase Facility
Line of Credit Facility [Line Items]
Balance	571,502
Amortized Cost of Collateral	1,012,396
Maximum Month-End Balance	672,477
Average Month-End Balance	583,879
Goldman Facility
Line of Credit Facility [Line Items]
Balance	112,713
Amortized Cost of Collateral	515,064
Maximum Month-End Balance	312,507
Average Month-End Balance	207,934
HSBC Facility
Line of Credit Facility [Line Items]
Balance	37,834
Amortized Cost of Collateral	53,946
Maximum Month-End Balance	50,784
Average Month-End Balance	47,830
USD | CS Facility
Line of Credit Facility [Line Items]
Balance	174,278
Amortized Cost of Collateral	238,441
Maximum Month-End Balance	188,037
Average Month-End Balance	$ 184,049
GBP | CS Facility
Line of Credit Facility [Line Items]
Balance | £			£ 144,364
Amortized Cost of Collateral | £			£ 206,422
Maximum Month-End Balance | £		£ 150,811
Average Month-End Balance | £		£ 145,599

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Senior Secured Term Loan, Net (Details) - USD ($)	3 Months Ended
	Jun. 30, 2019	May 31, 2019
London Interbank Offered Rate (LIBOR) | Interest Rate Swap
Debt Instrument [Line Items]
Fixed interest rate		2.12%
Secured Debt
Debt Instrument [Line Items]
Debt instrument, face amount		$ 500,000,000.0
Debt instrument, issuance price as a percentage		99.50%
Debt instrument, covenant, non-recourse debt to tangible net worth ratio, maximum		3
Debt instrument, covenant, unencumbered assets to pari-passu indebtedness ratio, maximum		1.25
Effective interest rate		4.87%
Secured Debt | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate	2.75%

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Convertible Senior Notes, Net (Details)			2 Months Ended	3 Months Ended				6 Months Ended		12 Months Ended
	Mar. 15, 2019 USD ($)	Aug. 02, 2018 USD ($) shares	Sep. 30, 2018 USD ($) shares	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($) shares	Dec. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) offering	Dec. 31, 2017 USD ($)	Dec. 31, 2014 USD ($) offering	Oct. 05, 2018 USD ($)
Debt Instrument [Line Items]
Cash payment for debt redemption								$ 704,000	$ 0
Conversions of convertible senior notes for common stock					$ 33,778,000
Convertible senior notes, net				$ 559,619,000		$ 592,000,000		559,619,000		$ 592,000,000
Common Stock
Debt Instrument [Line Items]
Conversions of convertible senior notes for common stock (in shares) | shares					1,967,361
Conversions of convertible senior notes for common stock					$ 20,000
Additional Paid In Capital
Debt Instrument [Line Items]
Conversions of convertible senior notes for common stock					$ 33,758,000
Convertible Debt
Debt Instrument [Line Items]
Principal Amount				575,000,000				575,000,000
Interest expense				7,200,000			$ 7,600,000	14,800,000	15,200,000
Non-cash interest expense				1,400,000			$ 1,800,000	3,100,000	$ 3,700,000
Convertible Debt | 2019 and 2022 Notes [Member] | Additional Paid In Capital
Debt Instrument [Line Items]
Conversions of convertible senior notes for common stock								15,400,000
Convertible Debt | 2019 Notes
Debt Instrument [Line Items]
Number of debt offerings issued | offering												2
Principal Amount												$ 254,800,000
Coupon Rate												5.50%
Proceeds from issuance of convertible senior notes												$ 248,600,000
Principal amount redeemed		$ 206,200,000	$ 47,900,000
Cash payment for debt redemption	$ 700,000	$ 39,300,000	$ 200,000
Loss on early extinguishment of debt				0				0		$ 2,600,000
Convertible Debt | 2019 Notes | Common Stock
Debt Instrument [Line Items]
Conversions of convertible senior notes for common stock (in shares) | shares		10,020,328	2,775,509		1,967,361
Conversions of convertible senior notes for common stock					$ 33,800,000
Convertible Debt | 2019 Notes | Additional Paid In Capital
Debt Instrument [Line Items]
Conversions of convertible senior notes for common stock		$ 166,000,000.0	$ 13,900,000
Convertible Debt | 2022 Notes
Debt Instrument [Line Items]
Number of debt offerings issued | offering										2
Principal Amount											$ 345,000,000.0
Coupon Rate											4.75%
Proceeds from issuance of convertible senior notes											$ 337,500,000
Convertible senior notes, net				336,500,000				336,500,000
Unamortized discount				8,500,000				8,500,000
Convertible Debt | 2022 Notes | Additional Paid In Capital
Debt Instrument [Line Items]
Conversions of convertible senior notes for common stock								11,000,000.0
Convertible Debt | 2023 Notes
Debt Instrument [Line Items]
Principal Amount						230,000,000.0				$ 230,000,000.0			$ 230,000,000
Coupon Rate													5.375%
Proceeds from issuance of convertible senior notes						$ 223,700,000
Convertible senior notes, net				223,100,000				223,100,000
Unamortized discount				$ 6,900,000				6,900,000
Convertible Debt | 2023 Notes | Additional Paid In Capital
Debt Instrument [Line Items]
Conversions of convertible senior notes for common stock								$ 4,400,000

XML

Convertible Senior Notes, Net - Summary of Note Terms (Details) - Convertible Debt		6 Months Ended	12 Months Ended
	Oct. 05, 2018 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Principal Amount		$ 575,000,000
Conversion rate basis, principal amount		$ 1,000,000
2022 Notes
Debt Instrument [Line Items]
Principal Amount			$ 345,000,000.0
Coupon Rate			4.75%
Effective Rate			5.60%
Conversion Rate		0.0502260
Remaining Period of Amortization			3 years 1 month 24 days
2023 Notes
Debt Instrument [Line Items]
Principal Amount	$ 230,000,000			$ 230,000,000.0
Coupon Rate	5.375%
Effective Rate	6.16%
Conversion Rate		0.0487187
Remaining Period of Amortization	4 years 3 months 14 days

XML

Derivatives - Additional Information (Details)	May 31, 2019
London Interbank Offered Rate (LIBOR) | Interest Rate Swap
Derivative [Line Items]
Fixed interest rate	2.12%
Secured Debt
Derivative [Line Items]
Effective interest rate	4.87%

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Derivatives - Summary of Non-Designated Foreign Exchange Forwards (Details) - Not Designated as Hedging Instrument $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) contract	Dec. 31, 2018 USD ($) contract
Interest Rate Swap
Derivative [Line Items]
Number of Contracts | contract	1
Aggregate Notional Amount (in thousands) | $	$ 500,000
Weighted-Average Years to Maturity	6 years 10 months 13 days
GBP | Forward Currency Contract
Derivative [Line Items]
Number of Contracts | contract	95	43
Aggregate Notional Amount (in thousands) | $	$ 271,961	$ 270,161
Weighted-Average Years to Maturity	10 months 20 days	8 months 8 days
EUR | Forward Currency Contract
Derivative [Line Items]
Number of Contracts | contract	15
Aggregate Notional Amount (in thousands) | $	$ 183,689
Weighted-Average Years to Maturity	10 months 13 days

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Derivatives - Summary of Amounts Recognized on Consolidated Statements of Operations Related to Company's Derivatives (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments - unrealized			$ (17,311,000)	$ 15,941,000
Forward Currency Contract
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments	$ 11,186,000	$ 33,538,000	4,466,000	22,506,000
Forward Currency Contract | Gain (Loss) on Derivative Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments - unrealized	10,787,000	24,800,000	(4,198,000)	15,941,000
Gain on derivative instruments - realized	399,000	8,742,000	8,664,000	6,565,000
Interest Rate Cap | Gain (Loss) on Derivative Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments - unrealized	0	(4,000)	0	0
Gain on derivative instruments - realized	11,186,000	33,538,000	4,466,000	22,506,000
Derivative notional amount	0.0	37,500,000	0.0	37,500,000
Interest Rate Swap
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments	(13,113,000)	0	(13,113,000)	0
Interest Rate Swap | Gain (Loss) on Derivative Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments - unrealized	(13,113,000)	0	(13,113,000)	0
Derivative notional amount	$ 500,000,000.0	$ 0.0	$ 500,000,000.0	$ 0.0

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Derivatives - Summarizes Gross Asset and Liability Amounts Related to Derivatives (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Forward currency contracts
Derivative [Line Items]
Gross Amount of Recognized Assets (Liabilities)	$ 19,760	$ 23,753
Gross Amounts Offset in the Condensed Consolidated Balance Sheet	(258)	(53)
Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet	19,502	23,700
Interest rate swaps
Derivative [Line Items]
Gross Amount of Recognized Assets (Liabilities)	(13,113)	0
Gross Amounts Offset in the Condensed Consolidated Balance Sheet	0	0
Net Amounts of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet	$ (13,113)	$ 0

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Accounts Payable, Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accrued dividends payable	$ 74,295	$ 69,033
Collateral deposited under derivative agreements	1,820	20,000
Accrued interest payable	13,470	14,208
Accounts payable and other liabilities	7,151	1,505
Total	$ 96,736	$ 104,746

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Related Party Transactions (Details) $ in Thousands, £ in Millions	1 Months Ended						3 Months Ended		6 Months Ended
	May 31, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2018 GBP (£)	May 31, 2018 USD ($)	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Related Party Transaction [Line Items]
Base management fees incurred but not yet paid							$ 10,259		$ 10,259		$ 9,804
Commercial mortgage loans and subordinate loans, net							5,443,744		5,443,744		4,927,593
Related party expenses							10,259	$ 9,013	$ 19,872	$ 17,105
Arrangement Fees
Related Party Transaction [Line Items]
Related party expenses	$ 600
Limited Liability Company
Related Party Transaction [Line Items]
Rate of management fees									1.50%
Extension period									1 year
Period of termination									180 days
Termination fee calculation period									24 months
Limited Liability Company | Management Fees
Related Party Transaction [Line Items]
Base management fees incurred but not yet paid							10,300		$ 10,300		9,800
Affiliated Entity | Management Fees
Related Party Transaction [Line Items]
Related party expenses							10,300	9,000	19,900	17,100
Affiliated Entity | Reimbursements
Related Party Transaction [Line Items]
Related party expenses							700	$ 600	1,400	$ 1,200
Commercial Mortgage Portfolio Segment
Related Party Transaction [Line Items]
Commercial mortgage loans and subordinate loans, net							$ 4,206,754		$ 4,206,754		$ 3,878,981
Commercial Mortgage Portfolio Segment | Affiliated Entity
Related Party Transaction [Line Items]
Payments to acquire loans receivable		$ 6,400	£ 4.8	$ 28,200	$ 25,000	$ 25,000
Commercial mortgage loans and subordinate loans, net				$ 300,000	$ 125,000	$ 100,000

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Share-Based Payments - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Apr. 16, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized stock-based compensation expense	$ 4,294		$ 4,014		$ 8,195	$ 7,356
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation expense	500				500
RSU
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation expense	$ 23,300				$ 23,300
LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)							7,000,000
Common stock, shares delivered					433,426	345,996
LTIP | RSU
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock units vested					730,717	603,677
Adjustments to additional paid in capital, income tax deficiency from share-based compensation					$ 5,000	$ 4,700
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share price (in dollars per share)								$ 16.66
Common stock, shares delivered	27,245	433,426	28,070	345,996

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Share-Based Payments - Summary of Grants, Exchanges and Forfeitures of Restricted Stock and RSUs (Details) - LTIP $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Grant Date Fair Value | $	$ 500
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)	65,697
Granted (in shares)	27,245
Vested (in shares)	(47,586)
Forfeitures (in shares)	0
Outstanding, ending balance (in shares)	45,356
RSU
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)	1,852,957
Granted (in shares)	0
Vested (in shares)	0
Forfeitures (in shares)	(6,784)
Outstanding, ending balance (in shares)	1,846,173

XML

Share-Based Payments - Summary of Restricted Stock and RSU Vesting Dates (Details) - LTIP	Jun. 30, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	1,891,529
2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	905,976
2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	651,181
2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	334,372
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	45,356
Restricted Stock | 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	20,000
Restricted Stock | 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	25,356
Restricted Stock | 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	0
RSU
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	1,846,173
RSU | 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	885,976
RSU | 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	625,825
RSU | 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vesting (in shares)	334,372

XML

Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands			2 Months Ended		3 Months Ended			6 Months Ended
	Jun. 10, 2019	Aug. 02, 2018	Jun. 10, 2019	Sep. 30, 2018	Jun. 30, 2019	Mar. 31, 2019	Mar. 31, 2018	Jun. 30, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Common stock, shares authorized (in shares)					450,000,000			450,000,000	450,000,000
Common stock, par value (in dollars per share)					$ 0.01			$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)					50,000,000			50,000,000	50,000,000
Preferred stock, par value (in dollars per share)					$ 0.01			$ 0.01	$ 0.01
Common stock, shares issued (in shares)					153,531,597			153,531,597	133,853,565
Proceeds from issuance of common stock net of offering costs					$ 314,800		$ 275,900
Increase to additional paid in capital as a result of conversion of 2019 Notes						$ 33,778
Series B Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares issued (in shares)					6,770,393			6,770,393	6,770,393
Preferred stock, shares outstanding (in shares)					6,770,393			6,770,393	6,770,393
Preferred stock dividend percentage								8.00%
Unpaid dividends (in USD per share)					$ 0.50	$ 0.50
Series C Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares issued (in shares)					0			0	6,900,000
Preferred stock, shares outstanding (in shares)					0			0	6,900,000
Redemption of preferred stock (in shares)	6,900,000
Preferred stock dividend percentage	8.00%
Redemption price (in USD per share)	$ 25.00		$ 25.00
Unpaid dividends (in USD per share)			$ 0.2223		$ 0.2223	$ 0.50
Common Stock
Class of Stock [Line Items]
Issuance of common stock (in shares)					17,250,000		15,525,000
Conversions of convertible senior notes for common stock (in shares)						1,967,361
Increase to additional paid in capital as a result of conversion of 2019 Notes						$ 20
2019 Notes | Convertible Debt | Common Stock
Class of Stock [Line Items]
Shares issued, price per share (in dollars per share)						$ 17.17
Conversions of convertible senior notes for common stock (in shares)		10,020,328		2,775,509		1,967,361
Increase to additional paid in capital as a result of conversion of 2019 Notes						$ 33,800
Follow On Public Offering | Common Stock
Class of Stock [Line Items]
Issuance of common stock (in shares)					17,250,000		15,525,000
Shares issued, price per share (in dollars per share)					$ 18.27		$ 17.77	$ 18.27

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Stockholders' Equity - Dividends Declared (Details) - $ / shares	2 Months Ended	3 Months Ended			6 Months Ended
	Jun. 10, 2019	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Class of Stock [Line Items]
Dividends declared (in dollars per share)		$ 0.46		$ 0.46	$ 0.92	$ 0.92
Common stock
Class of Stock [Line Items]
Dividends declared (in dollars per share)		0.46	$ 0.46
Series B Preferred Stock
Class of Stock [Line Items]
Dividends declared (in dollars per share)		0.50	0.50
Series C Preferred Stock
Class of Stock [Line Items]
Dividends declared (in dollars per share)	$ 0.2223	$ 0.2223	$ 0.50

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Total damages including punitive	$ 70,000
Damages sought by plaintiff	700,000
Unfunded loan commitments	1,192,118	$ 1,095,598
Commercial Mortgage and Subordinated Portfolio Segment
Schedule of Equity Method Investments [Line Items]
Unfunded loan commitments	$ 1,200,000

XML

Fair Value of Financial Instruments - Carrying Value and Estimated Fair Value of Company's Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Carrying Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Cash and cash equivalents	$ 116,472	$ 109,806
Estimate of Fair Value Measurement
Accounts, Notes, Loans and Financing Receivable [Line Items]
Cash and cash equivalents	116,472	109,806
Level 3 | Carrying Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Secured debt arrangements	(1,783,057)	(1,897,077)
Senior secured term loan	(490,226)	0
Level 3 | Estimate of Fair Value Measurement
Accounts, Notes, Loans and Financing Receivable [Line Items]
Secured debt arrangements	(1,783,057)	(1,897,077)
Senior secured term loan	(496,875)	0
Level 3 | 2019 Notes | Carrying Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes	0	(34,278)
Level 3 | 2019 Notes | Estimate of Fair Value Measurement
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes	0	(35,276)
Level 3 | 2022 Notes | Carrying Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes	(336,505)	(335,291)
Level 3 | 2022 Notes | Estimate of Fair Value Measurement
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes	(344,786)	(326,025)
Level 3 | 2023 Notes | Carrying Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes	(223,114)	(222,431)
Level 3 | 2023 Notes | Estimate of Fair Value Measurement
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes	(230,097)	(221,964)
Level 3 | Commercial Mortgage Portfolio Segment | Carrying Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	4,206,754	3,878,981
Level 3 | Commercial Mortgage Portfolio Segment | Estimate of Fair Value Measurement
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	4,263,296	3,894,947
Level 3 | Subordinate Mortgage Portfolio Segment | Carrying Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	1,236,990	1,048,612
Level 3 | Subordinate Mortgage Portfolio Segment | Estimate of Fair Value Measurement
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 1,246,454	$ 1,047,854

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Net Income per Share - Basic and Diluted Net Income per Share of Common Stock Using Two-Class Method (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Basic Earnings
Net income	$ 61,424	$ 67,758	$ 55,346	$ 49,433	$ 129,182	$ 104,779
Preferred dividends	(4,919)		(6,834)		(11,754)	(13,669)
Net income available to common stockholders	56,505		48,512		117,428	91,110
Less: Dividends on participating securities	(849)		(738)		(1,700)	(1,489)
Basic Earnings	55,656		47,774		115,728	89,621
Diluted Earnings
Basic weighted-average shares of common stock outstanding	56,505		48,512		117,428	91,110
Add: Interest expense on Notes	8,619				17,881
Diluted Earnings	$ 65,124		$ 48,512		$ 135,309	$ 91,110
Number of Shares:
Basic weighted-average shares of common stock outstanding	145,567,963		123,019,993		140,117,813	116,651,305
Diluted weighted-average shares of common stock outstanding	174,101,234		124,629,317		169,418,177	118,281,153
Earnings Per Share Attributable to Common Stockholders
Basic (in dollars per share)	$ 0.38		$ 0.39		$ 0.83	$ 0.78
Diluted (in dollars per share)	$ 0.37		$ 0.39		$ 0.80	$ 0.78

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Net Income per Share - Additional Information (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Effect of dilutive securities - Convertible Notes (in shares)	28,533,271		29,300,363
RSU
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Unvested RSUs (in shares)	1,846,173	1,609,324	1,847,860	1,629,848

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Subsequent Events (Details) - Subsequent Event $ in Millions	1 Months Ended
	Jul. 24, 2019 USD ($)
Subsequent Event [Line Items]
Funded amount of mortgages	$ 54.2
Proceeds from loan repayments	68.2
Commercial Mortgage Portfolio Segment
Subsequent Event [Line Items]
Committed capital	$ 51.5